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By XE Market Analysis June 19, 2013 2:07 am
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    XE Market Analysis: Europe - Jun 19, 2013

    The dollar consolidated ahead of today's FOMC outcome, leaving a mixed tone for regional stocks. USD-JPY held on to some of its gains over 95.00, but remained sensitive to equity market chop. Domestic markets were supported after Japanese trade pointed to an improvement in economic fundamentals. EUR-USD was steady close to 1.3400 after Tuesday's breach of 1.3400 barriers, while Cable was stable ahead of 1.5600 following yesterday's downturn amid a strong EUR-GBP bid. Meanwhile, AUD-USD maintained a heavy tone and edged through yesterday's 0.9440 lows as China remained a risk and after the RBA minutes.

    [EUR, USD]
    EUR-USD maintained a firm tone after the brief move above 1.3400 on Tuesday. EUR-JPY profit taking over 128.00 kept the upside in check, though support was evident into 1.3385 amid a bullish techical backdrop and support in the other EUR crosses. EUR-AUD held firm around 1.4100 and EUR-GBP consolidated around 0.8565 versus yesterday's peak at 0.8584. It looks likely that narrower ranges will continue until the FOMC outcome, but the balance of risk in the interim is on a move towards the 1.3430-50 zone.

    [USD, JPY]
    USD-JPY consolidated gains after topside movement ran out of over 95.60 in Asia versus yesterday's 95.76 peak. It ended the Asia session close to 95.30 as profit taking went through, while there was also light position adjustment noted after the Nikkei pulled back from session highs. There was optimism over the Japanese policy stance after an encouraging Japanese trade report saw a rise in both exports and imports. However, appetite to run speculative positioning was compromised to a degree by the pending FOMC outcome and ongoing conjecture over the China outlook.

    [GBP, USD]
    Cable is settled ahead of the 1.5600 region after it recovered from yesterday's lows just under 1.5570. It rebounded back towards 1.5660 by the N.Y. afternoon as the dollar weakened. However, EUR-GBP maintains a bid tone ahead of 0.8550 on mooted M&A interest, which has worked against the Cable topside. Of note during Tuesday's Cable downturn was increased IMM selling. These type of accounts have been adding to Cable shorts in recent weeks even though economic fundamentals have been more supportive. However, we think some of these accounts could lighten up positions on further Cable weakness as the likelihood of more BoE policy easing is now low based on recent economic data releases.

    [USD, CHF]
    The CHF marks time ahead of the FOMC outcome and then Thursday's SNB policy review. EUR-CHF is trading a tight range ahead of 1.2300 as EUR support limited downside movement. Yesterday's USD-CHF fall to 0.9175 capped the EUR-CHF topside over 1.2350, but there are signs that position traders still prefer to be long of the dollar pairing. The Fed are still more likely to move towards policy tapering at some point later this year, while the SNB are expected to continue with the current policy stance, which includes the lower limit in EUR-CHF at 1.2000.

    [USD, CAD]
    USD-CAD maintained its firmer tone overnight, leaving it elevated above 1.0200. It extended to highs of 1.0239 in early Asia Pacific trade as AUD-CAD demand went through., though profit taking and an overhang of USD selling from Asian sovereign types capped follow through. Bias for USD-CAD should remain on the topside in the interim as uncertainty over U.S. Fed policy has weighed the CAD down this week. However, offers are seen into 1.0250 and the 1.0275-80 area. Bids should underpin ahead of 1.0200 initially.

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