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By XE Market Analysis November 7, 2013 1:54 am
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    XE Market Analysis: Europe - Nov 07, 2013

    The FX majors held their ground ahead of today's key event risks, which included rate decisions from the BoE and ECB, along with U.S. advance Q3 GDP and jobless claims data. EUR held the 1.3500 level throughout the session following yesterday's move towards 1.3550, while Cable marked time just under 1.6100 amid a slightly improved EUR-GBP tone. USD-JPY was unable to make further gains as intra-day accounts got negative guidance from Asian stocks, which traded defensively ahead of key event risks, leaving it near 98.50. The main mover in the Asia region was AUD, which dropped sharply to trade back at 0.9470 after Australia jobs data disappointed, up 1.1k compared with a 10k forecast.

    [EUR, USD]
    EUR-USD maintained a steady tone above 1.3500 after it motored higher on Wednesday as ECB sources told MNI that an ECB rate change was unlikely today despite the recent inflation dip. EUR rallied towards 1.3550 on short covering and a stop hunt could be on the cards if 1.3570 deals. The pairing reportedly ran into strong option related selling interest ahead of 1.3550, which stopped the rally in its tracks. With the market now likely positioned for the ECB, we look for mostly sideways action to prevail.

    [USD, JPY]
    USD-JPY hovered on either side of 98.60, close to the top of the recent range. After large option expiries rolled off at 99.00 to 100.00 there may be better prospects for higher levels. Of course the potential for sustained dollar upside will lie with U.S. data due over the remainder of the week and Fed taper risk. Flows included dollar demand from fund names and importers, while option supply remained, along with exporter offers. BoJ Governor Kuroda and Deputy Iwata both said it too early to debate a QE exit. Recent comments from BoJ officials suggest Japan will stay the course on policy and could even ease again next year when the sales tax hike comes into play.

    [GBP, USD]
    GBP corrected slightly during Wedneday's N.Y. session as technical levels influenced. Cable topped out after failing at October-29 highs at 1.6119 on three occasions on the short-term chart before turning back to 1.6080. The move coincided with a EUR-GBP rebound out of 0.8380 as the cross matched October-3 lows near 0.8378. Economic fundamentals and recent technical studies are favourable for GBP, but U.S. data in the latter part of the week is a potential risk as strong data would support the dollar. Today's ECB policy announcement is also going to be a challenge for EUR-GBP traders. Most of the recent cross weakness has been on ECB rate cut risk and helped GBP outperform. Meanwhile, the BoE decision should be a non-event for markets ahead of next week's quarterly Inflation Report.

    [USD, CHF]
    CHF consolidated at easier levels after it dipped against the EUR and USD on Wednesday amid equity markets gains. EUR-CHF moved up through 1.2320 as 1.2300 held and it consolidated gains today. USD-CHF found buyers near 0.9100, but has struggled to sustain higher levels in recent sessions on risk aversion. Movement via the CHF is likely to remain extremely narrow in light of the event risks and data that is due today and tomorrow.

    [USD, CAD]
    USD-CAD remained hemmed in overnight between 1.0410 and 1.0460. More of the same is likely in order ahead of the ECB meetings and U.S. jobs report on Friday. Yesterday's firmness via the Canadian Ivey PMI helped the CAD marginally, but a congestion of orders limited movement ahead of key event risks. Bids are in place at 1.0400 with offers from 1.0460, which should continue to keep things narrow.

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