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By XE Market Analysis June 12, 2013 2:12 am
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    XE Market Analysis: Europe - Jun 12, 2013

    In Asia, USD-JPY gained on repositioning and there was further choppy action via AUD-USD. Regional stock markets posted moderate losses, but several centers were closed, which dampened activity. The dollar consolidated Tuesday's losses, which left EUR in a tight range close to 1.3300 and Cable maintained a firm tone over 1.5600. Economic data included Japan core machinery orders, which remained soft in April at -1.1% m/m and -8.8% y/y. In Australia, June consumer confidence rose 4.7% m/m and 6.9% y/y to 102.2. In Europe, economic data today includes EMU industrial production and U.K. labour market data. The focus remains on ECB policy and bond buys after yesterday's German Constitutional Court hearing. However, we do not expect the court to stop the OMT program.

    [EUR, USD]
    EUR-USD consolidated Tuesday's gains overnight, leaving it close to 1.3300 as the European session gets underway. It failed to break resistance from late February at 1.3320, which fueled some light selling late on in Asia. However, it looks likely that dip buying will continue in the near-term amid a bullish technical backdrop. The EUR crosses are likely to be key today, with equity markets heavily influential for EUR-JPY and EUR-CHF in recent sessions. On the EUR-USD topside both sovereign and corporate accounts are tipped from 1.3330 to 1.3350. Buyers are congested into 1.3270 initially and increase in size under 1.3250 and 1.3220.

    [USD, JPY]
    USD-JPY posted a healthy recovery after it bottomed out just ahead of 95.50 during Tuesday's N.Y. session. There was still residual disappointment in Asia after yesterday's BoJ outcome, which sparked a round of deleveraging across global asset markets. However, Japanese importers were heavy dollar buyers on dips, which put a floor in place and contributed heavily to the upturn in Tokyo today. Specs traded in lockstep with Japanese stock markets, which were volatile, but managed to cut losses to trade close to flat into the Tokyo close compared with a 1.8% drop during the morning session. There was conjecture from equity traders that the GPIF may be a buyer into the 13k level and this looks as if it helped the underlying tone, leaving USD-JPY at 96.80 at the European open.

    [GBP, USD]
    Cable is holding firm over 1.5600 after it triggered buy stops through 1.5605-10 and 1.5645 on Tuesday as the dollar experienced another modest downdraft. U.K. think tank NIESR also released its latest estimates for U.K. GDP. It estimated growth of 0.6% in May from a revised 0.8% outturn in April from 1% previously reported, which added to evidence that the U.K. economy is recovering. Cable longs are gearing up for a retest of last week's previous highs at 1.5684, but very good selling pressure was noted around 1.5650 in N.Y. and Asia reportedly from an active account out of Asia.

    [USD, CHF]
    EUR-CHF steadied around the 1.2300 after it was unable to sustain the brief move lower on Tuesday. It quickly lost altitude after the N.Y. options cut. However, blink and you would have missed it. It did a round trip from 1.2295 down to 1.2240 and then backed up to 1.2300. It has been supportive in Asia, with buyers noted from 1.2280-85, though offers are noted from 1.2320-30 currently and more sellers are seen over the 1.2350 level. The 200-dma at 1.2220 represents a key area for buy orders on the downside and we anticipate fresh longs on dips.

    [USD, CAD]
    USD-CAD is stable around 1.0200 after testing both sides of the market in Asia. It was choppy session Tuesday, but overall directional bias was limited. USD-CAD tested support lower down after offers from 1.0250-60 capped. Buyers from 1.0180 to 1.0170 held the downside overnight and it headed back to 1.0215 by early Europe as equity markets struggled again.

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