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By XE Market Analysis July 2, 2013 2:08 am
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    XE Market Analysis: Europe - Jul 02, 2013

    Consolidation was noted in the FX majors in relatively quiet trade. Larger flows were minimal ahead key event risks later this week, which include the ECB policy meeting and Friday's NFP data. Sentiment was positive early on following yesterday's U.S. data, which saw both the USD and JPY consolidate Monday's easier levels. The AUD was the main mover after the RBA left rates unchanged at 2.75%, which was in line with expectations. AUD fell back from 0.9235 through 0.9170 after the RBA said AUD was still high and could fall further. NZD-USD fell in sympathy and moved through 0.7800 versus an early high of 0.7830.

    [EUR, USD]
    EUR-USD was supported over the course of the Asian session. It edged up through 1.3070 early on, but light U.S. account sell-interest and EUR-JPY supply put a top in place and it headed back to 1.3050 during the Asian afternoon. More rangebound trading is likely to continue in the near-term. There are a plethora of bids that are layered towards 1.3000 and below, while short term funds are keeping the topside capped ahead of buy stops through 1.3100.

    [USD, JPY]
    USD-JPY maintained a firm tone, which left it in close proximity to outstanding options at 100.00. Buyers at 99.50 put a floor in place and it moved briefly through the 99.70 area. However, exporter offers and interest from interbank names limited the upside, along with JPY-cross supply. EUR-JPY met sellers from the 130.25 region, though was supported throughout on equity market gains. AUD-JPY was weighed by the RBA rate decision and pulled back from just over 92.00 to 91.50. Bias for USD-JPY is on large buy stops above 100.00 and through the 100.15-20 area.

    [GBP, USD]
    GBP was unable to sustain yesterday's brief gains after U.K. manufacturing data strength and reverted to lower levels. Cable is trading close to 1.5200 after it topped out close to 1.5250, while EUR-GBP demand picked up sharply into and beyond yesterday's London close, leaving it close to the 0.8600 region. Demand for the cross was exacerbated by general EUR demand, along with speculation of residual M&A related flows. GBP supply also intensified ahead of the BoE policy meeting later this week, where Carney takes charge for the first time. No change is expected but in the months ahead there is likely to be more emphasis on forward policy guidance.

    [USD, CHF]
    CHF tracked demand for yen-funded carry trades, which supported EUR-CHF close to 1.2350 and USD-CHF briefly reached the 0.9500 region on Monday. A pick up in EUR-USD forced USD-CHF off the 0.9500 area. However, the 100-dma at 0.9413 is still providing a prop for the market, with short term accounts placing bids ahead from 0.9430-40. EUR-CHF gains have been limited by a congestion of orders that are layered into 1.2370, related to highs from mid-June, and could result in a topside failure.

    [USD, CAD]
    USD-CAD is rangebound after quiet trade on Monday amid a Canada market holiday. It found support under 1.0500 following the drop from near 1.0530 to just under 1.0490 amid the better U.S. ISM outcome, though with Canada on holiday, CAD trade was thin. USD-CAD buyers were quick to return under 1.0500 and it edged up through 1.0520 in overnight trade. More range bound trade looks likely. The underlying tone encourages buyers from 1.0490 to 1.0470, while offers are seen at 1.0530 and increase in size at 1.0550.

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