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By XE Market Analysis June 26, 2013 3:25 am
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    XE Market Analysis: Europe - Jun 26, 2013

    Equity market performance guided action across FX today. Sentiment was positive in early trade after yesterday's rebound on the SSEC into the close and a strong close for Wall Street and Europe. However, the pick up in speculative flows dampened as the session progressed. The SSEC was weighed by banks unwinding wealth management products, which forced the Nikkei lower, though both the ASX and the Hang Seng were in positive territory. The dollar was underpinned overall, supported by yesterday's firm U.S. data, which underpinned Fed policy tapering expectations. Gold and silver fell sharply as a consequence through $1245 and $18.80, respectively, which capped AUD ahead of 0.9300. USD-JPY met offers over 98.20 related to unwinding by leverage funds, along with option related selling amid large option expiries.

    [EUR, USD]
    EUR-USD ran into selling pressure on upticks after it closed just under 1.3070 on Tuesday as the dollar benefited from a strong U.S. data round. Bias remains on the downside, based on both the technical and fundamental backdrop. However, both large European corporate bids and commercial flows from sovereigns is likely into 1.3050 and below. Option expiries between 1.3000 and 1.3035 could also keep prices action limited and in N.Y. yesterday there were reports of option names also selling into strength.

    [USD, JPY]
    USD-JPY made an early push higher amid improved sentiment and a pick up in U.S. yields. Japanese buyers were noted out of 97.75 initially, while a U.S. fund carried it through the 98.00 area to force highs of 98.24. There were a plethora of offers around the highs, with Japanese and offshore names were noted. Very large option expiries between 98.00 and 98.40 reportedly encouraged supply, while a downturn in sentiment as the session progressed also fueled an unwinding of dollar longs. USD-JPY broke the 98.70 area and short term stops triggered a move through 97.50 by late Asia. USD-JPY's inability to close above 98.00 this week should continue to work against the topside in the near-term.

    [GBP, USD]
    GBP is currently mixed, with EUR-GBP pressured, while Cable has looked toppish into 1.5500 in recent sessions due to underlying dollar strength. Corporate selling went though Cable from 1.5475 on Tuesday, leaving it relatively close to 1.5400. Support is noted at 1.5400-10 from intra-day accounts protecting sell stops lower down, while last week's pullback from over 1.5700 should still encourage supply on upticks. Order congestion has started to build across 1.5500 and between 1.5520 to 1.5530.

    [USD, CHF]
    EUR-CHF pulled back a bit after it was unable to sustain a move just over 1.2300 on Tuesday. EUR-CHF headed back to the 1.2260 area by today's European open as fresh money poured into the swissy, while USD-CHF is capped from 0.9400 and above. After recent market volatility, SNB board member Zurbruegg reiterated on Tuesday the importance of the CHF cap, which he said remained as current as ever. This should limit how far the CHF can rally and there is very good local demand in EUR-CHF ahead of 1.2220, while good long-term support is noted from 1.2215 (200-dma) to 1.2200.

    [USD, CAD]
    USD-CAD is consolidating under 1.0500 after it was unable to sustain higher levels on Tuesday. A pick up in equity markets boosted the CAD$ from 1.0548 during the N.Y. morning and it headed back to 1.0480 by today's European open. Price action is quite disjointed still as equity market volatility saw CAD$ see-saw between positive and negative territory. Currently, a hold above 1.0450 is keeping bias on the topside and bids are tipped between 1.0480 and 1.0460 in the near-term. Over 1.0500 there are a plethora of offers from 1.0520-30 and into 1.0550, while long-term resistance is seen into 1.0570-75.

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