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By XE Market Analysis July 8, 2013 3:01 am
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    XE Market Analysis: Europe - Jul 08, 2013

    The dollar held on to Friday's strong gains following the U.S. NFP release, which underpinned expectations that the Fed could begin to taper policy from September. This left EUR close to 1.2800, while Cable headed back below 1.4900 and USD-JPY was supported over 101.00. Data AUD was heavy under 0.9050 on China risk and more domestic data weakness, with the latest ANZ job ads data coming in at -1.8% m/m. Meanwhile, the China Securities Journal said that China GDP may slow to 7.5% in Q2 and added that export data may by weak.

    [EUR, USD]
    EUR-USD pressured the 1.2800 region on underlying dollar strength. It met selling pressure from the 1.2830 region and more offers are tipped into 1.2850 and 1.2880. Pressure is expected to remain firmly on the EUR downside after the U.S. data strength on Friday, along with the ECB's forward policy guidance. Good size sell stops are tipped below 1.2800 and 1.2790, leaving the focus on support from early April at 1.2745. Elsewhere, Reuters reported that Eurozone officials may decide on Greece's cash injection today and are likely to warn Portugal on its bailout term after the pick up in political uncertainty last week.

    [USD, JPY]
    USD-JPY saw good two way flows. Good dollar demand from short term fund names and retail accounts lifted the pair up through 101.50. A pick up in U.S. yields on Friday provided positive guidance, though once stops gave way around the highs there was no follow through due to an overhang of Japanese offers. Corporate hedging and interest from a trust bank forced a move back into the 101.00-10 region, though dip buying kept the downside underpinned into the Tokyo close.

    [GBP, USD]
    GBP remains heavy after it crashed to 1.4860 lows over the NFP data. There was selling pressure on upticks in early Asia, which forced it back into the 1.4860 region. Since the European session got underway buyers on dips have included Asian reserve managers, while there is largely outstanding option barriers at 1.4850. Offers are noted from 1.4925-30.

    [USD, CHF]
    EUR-CHF is on the front foot after it pushed higher on Friday. The CHF maintained softer levels after it fell on Thursday in the wake of dovish policy outcomes from the ECB and BoE, while in the aftermath of the U.S. jobs report USD-CHF also posted one-month highs over 0.9660. EUR-CHF is skewed to a moved on the 1.2400 region, though underlying EUR heaviness may limit momentum. USD-CHF is expected to meet option related offers ahead of 0.9700.

    [USD, CAD]
    USD-CAD headed back towards the 1.0560 region by early Europe as profit taking set in. On Friday, the twin Canada/U.S. employment reports saw the pair rally sharply from near 1.0525 to over 1.0600. The rally marked the first time over 1.0600 since October of 2011, where a high of 1.0657 was printed. Option barriers were reportedly extinguished at the figure on the move, though fund and CTA selling was noted above 1.0600. We look for some near term consolidation, with 1.0550 to 1.0600 holding for now.

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