Home > XE Currency Blog > XE Market Analysis: Europe - Jul 10, 2013


XE Currency Blog

Topics7434 Posts7479
By XE Market Analysis July 10, 2013 2:46 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5358
    XE Market Analysis: Europe - Jul 10, 2013

    China trade data limited risk appetite after it came in at very weak levels, with exports dropping 3.7% y/y and imports down 0.7% y/y. However, AUD found support on dips and recovered from 0.9125 to trade over 0.9200 as the breakdown revealed a rise in Australia imports. The dollar maintained a firm tone against the EUR after ECB's Asmussen fleshed out ECB's position on forward guidance, while S&P downgraded Italy to BBB from BBB+ with a negative outlook. There was some late dollar selling in Asia after USD-JPY broke support through 100.75 amid an unexpected decline in Japan consumer confidence to 44.3 in June from 45.7, which weighed on the Nikkei into the close. The dollar sell-off enabled Cable to trade back over 1.4900, though it had already benefited from a EUR-GBP correction into the 0.8575 region versus yesterday's 0.8669 peak.

    [EUR, USD]
    EUR-USD maintained a heavy tone under 1.2800 after yesterday's sharp sell-off, which came on remarks from ECB's Asmussen, who said that the ECB's forward guidance extends beyond 12-months. S&P's downgrade of Italy also compounded the move and forced a low of 1.2755 in N.Y., but in Asia it has met natural buyers. Commercial flows were evident on dips, while it's likely that options will also feature ahead of April-4 lows of 1.2745. The late dollar sell-off in Asia helped it back towards 1.2800, though we anticipate good selling pressure on upticks.

    [USD, JPY]
    USD-JPY spent a large part of the session in a narrow range close to 101.00, with positioning kept on the light side ahead of today's FOMC minutes and a speech from Bernanke. There is also tomorrow's BoJ policy outcome to digest, though the Bank is not expected to deviate from the previous stance. USD-JPY made a mild pushed higher, but could not sustain movement over 101.20 and edged back through 101.00. It fell sharply into the Tokyo close as the Nikkei fell back by around 0.75% after weaker than expected consumer confidence data. The USD-JPY move through near-term support at 100.75 triggered stops and it extended to 100.30. Bids are likely from the 100.25 region, while support is noted across the 100 level.

    [GBP, USD]
    Cable posted a modest correction from Tuesday's trend lows around 1.4815. It headed back over the 1.4900 handle overnight as the dollar came under selling pressure, while EUR-GBP corrected to 0.8575. The downturn in sterling was exacerbated by soft manufacturing and industrial production data, but this may have been exacerbated by one-off effects. On the whole, U.K. data has been improving and the IMF also upgraded its growth outlook for the U.K. yesterday. In the near-term, dip buying is anticipated into 1.4850 and below. Offers should build towards 1.4950 and into 1.5000, which is now a key resistance level after the recent break lower.

    [USD, CHF]
    The CHF recovered some of its recent losses. EUR weakness forced EUR-CHF from 1.2465 highs back into 1.2420, while USD-CHF edged off 0.9750 back into the 0.9710 area. The scope for further swissy gains may be limited in the near-term. USD-CHF should find support on dips due to the Fed policy outlook and this has tended to drive EUR-CHF moves of late. There was also conjecture yesterday that SNB could be forced to take a more aggressive stance on policy now that ECB has decided to provide forward policy guidance. Near-term EUR-CHF support is seen into 1.2400 and 1.2370. USD-CHF buyers are noted into 0.9700 and below.

    [USD, CAD]
    USD-CAD edged into the 1.0505-10 area amid light dollar selling and a supportive risk backdrop. However, follow through may be limited after the weak China trade data, which will raise concerns over the global growth outlook. This was one of the risks cited by the IMF in yesterday's report. Solid bid interest is seen into 1.0500, though order congestion remains from 1.0550 and above, which could keep ranges fairly narrow over the course of the session.

    Paste link in email or IM