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By XE Market Analysis July 24, 2013 2:35 am
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    XE Market Analysis: Europe - Jul 24, 2013

    The dollar found a modicum of support in Asia after China's HSBC flash manufacturing PMI hit an eleven month low of 47.7. The dip in sentiment was compounded by an article in the China Securities Journal, which claimed that China Q4 economic growth may be less than 7%, adding that it's lower limit for growth is misunderstood. EUR pulled back from 1.3230, but still held on to 1.3200. Japan trade data saw exports rise for the fourth consecutive month at 7.4% in June versus a 10.1% rise in May and saw USD-JPY edge up from 99.40 to 99.80. AUD-USD experienced choppy action and took out 0.9300 before it headed back below 0.9250 on China data and Australia Q2 CPI, which reduced expectations of a RBA rate cut in August.

    [EUR, USD]
    EUR-USD consolidated gains over 1.3200 on Tuesday as the dollar was weighed by weak U.S. economic data. The EUR still struggled to clear away very good offers from 1.3250, which falls in line with highs from late June. These held the topside in N.Y. and in Asia there was no appetite to test the upside aggressive. After China PMI data the EUR dipped into the 1.3200 region, where supportive bids were noted from short term accounts playing the range. Weak longs may bail if the EUR struggles to sustain higher levels during the European time zone.

    [USD, JPY]
    USD-JPY continued to trade in a tight range. Japan trade data did not have an impact on the market, although it continued to point to on-going progress in the Japanese economic recovery as exports rose for the fourth consecutive month. USD-JPY keyed off broader dollar movement and AUD-USD's price chop up through 0.9300 and back down to 0.9250 lifted it out of 99.40 early on up to the 99.75 region. China flash PMI data also reinforced growth fears and was another supportive lead for the dollar, but overall rangebound action continues to dominate amid increasing order flow on either side of the 99.00-100.00 corridor.

    [GBP, USD]
    Cable consolidates recent gains. Movement in the last 24 hours have been limited to short term flows. Corporate hedging and retail names kept it capped ahead of resistance into 1.5400 on Tuesday's. A minor push on stops lower down ran out of steam into 1.5325 due to GBP-cross demand, which included leverage names in GBP-JPY, while residual Swiss interest spilled into GBP-CHF. GBP is hanging on positive momentum. However, it could be close to a near-term top after failing to register a higher high on Tuesday and the close under 1.5400 supports this view.

    [USD, CHF]
    EUR-CHF is trading back at familiar levels just in front of 1.2350 after it was unable to sustain yesterday's move higher. A USD-CHF move out of 0.9350 back to 0.9400 and EUR-USD's firm tone lifted EUR-CHF out of 1.2345 to 1.2395 highs. Strong offers at 1.2400 capped, while a downturn in risk appetite encouraged speculative demand for the CHF at cheaper levels. EUR-CHF ended the N.Y. session at 1.2360 and edged lower in Asia as risk aversion picked up on disappointing China PMI. This lifted USD-CHF back out of 0.9345 through 0.9370.

    [USD, CAD]
    USD-CAD is trading back above 1.0300 due to the downturn in risk appetite. Sentiment faded over the N.Y. session on Tuesday, while in Asia more evidence that China is slowing weighed on stocks and the commodity bloc currencies. After bottoming out at 1.0278 on Tuesday it is now trading close to 1.0310. Buyers under 1.0300 included both an Asian sovereign name and IMM accounts. Note, there is also modest support at June 20 lows at 1.0268.

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