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By XE Market Analysis November 22, 2013 1:56 am
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    XE Market Analysis: Europe - Nov 22, 2013

    The dollar was mixed in Asia. It maintained softer levels against EUR and GBP, but was supported against JPY, AUD and NZD. EUR benefited on short covering Wednesday as ECB's Draghi offered no new insight into negative deposit rates, while fund names piled into GBP on more U.K. data strength. AUD was hammered by more currency talk from RBA Stevens, who discussed the pros and cons of FX intervention during yesterday's European morning. RBNZ Assistant Government McDermott said NZD was overvalued and would like to see it lower, but admitted that FX intervention was unlikely to have a sustained impact on lowering NZD, leaving it to the whims of the market. Elsewhere, BoJ Governor Kuroda told the Diet that it was too early to talk about QE exit, adding it would adjust policy when needed. He did not think that JPY was at abnormally low levels, adding there are no asset bubbles now.

    [EUR, USD]
    EUR-USD was underpinned throughout the Asia session, though most of the flows were cross-related. EUR-JPY reached 136.55 highs early on and EUR-AUD also carved out a decent rally out of 1.4600 to 1.4670, which offset EUR-GBP heaviness near 0.8320. The bias for EUR-USD is for lower levels based on the contrasting policy outlook in the Eurozone and the U.S. However, it has not sustained a period of lower levels and short term players are more inclined to sell into strength rather than chasing the pair lower. Offers are seen into 1.3500 and above.

    [USD, JPY]
    USD-JPY and the JPY crosses were well supported by equity market gains. The Nikkei carved out an early six-month high, which boosted USD-JPY to 101.35. Follow through was contained thereafter as profit taking set in across Japanese equity markets, while exporter selling picked up ahead of more option barrier exposure at 101.50, leaving it near 101.00. EUR-JPY also turned away from an early high at 136.55 and traded back to the 136.00-20 region. Demand for USD-JPY on dips is very strong, with importers and fund names likely to keep the downside limited. Bids were lifted to higher levels on Thursday and support under 101.00 is now seen from 100.80 to 100.50.

    [GBP, USD]
    Cable was boosted by strong U.K. data. A very impressive U.K. CBI monthly trends survey on Thursday carried Cable back to the 1.6200 region. Since the start of the week Cable traders have noted positioning for further upside. EUR-GBP tried to carve out a recovery with EUR-USD on Thursday, though rate dynamics in the U.K. and the Eurozone may make this a fruitless trade and there are proprietary accounts that seem to agree with this view amid reports of funds fading the rally. Eventually we suspect that Cable will revisit the 1.6250-60 region that marked the top of the long-trend in October.

    [USD, CHF]
    EUR-CHF drifted into the 1.2305 on Thursday, with EUR and USD fluctuation still driving action. USD-CHF shot over 0.9190 from near 0.9100, in concert with EUR-USD's dive on Wednesday and following the FOMC minutes. From there however, the CHF firmed up amid EUR-USD's move back over 1.3470. For the most part, activity in the swissy has been uneventful since the SNB warned that it was digesting the impact from the recent ECB rate cut. This has been enough to deter heavier demand for the CHF and it looks like this theme will continue in the near-term.

    [USD, CAD]
    USD-CAD posted decent gains on Thursday on dollar strength against the commodity bloc currencies. A lack of downside progress this week and a series of higher highs encouraged short term accounts to attack topside levels. Barriers at 1.0500 fell on Thursday and buy stops at 1.0520 triggered follow through gains on 1.0547 highs in Asia. There are more option barriers to contend with at 1.0550, though bias is with a push on August highs at 1.0568 and then perhaps the July peak at 1.0609. On the macro front, CAD traders will focus on October CPI later today.

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