Home > XE Currency Blog > XE Market Analysis: Europe - Sep 04, 2013

AD

XE Currency Blog

Topics7443 Posts7488
By XE Market Analysis September 4, 2013 2:56 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5367
    XE Market Analysis: Europe - Sep 04, 2013

    The dollar consolidated Tuesday's gains and remained close to the top end of the recent range. There was no fallout from Syria despite rising expectations that the U.S. will launch a military strike. The exception in Asia was AUD, which broke above 0.9100 after Australia Q2 GDP rose 0.6% q/q from 0.5% in Q1. The number was in line with expectations, but gains were a symptom of more repositioning by long-term shorts following yesterday's RBA policy statement. Today's data and signs that China is also picking up again should leave the RBA on hold now for the foreseeable future. Meanwhile, USD-JPY held steady near the 100.00 area. Dip buying was evident amid the bullish underlying trend and as the Nikkei cut losses into the close to end in positive territory. EUR marked time around 1.3165 following yesterday bounce out of the 1.3140 area.

    [EUR, USD]
    EUR-USD was supported on news that both sides of the House backed President Obama's plans for military action against Syria. The EUR breached the 200-dma to move into the 1.3140 area on Tuesday. However, U.S. yields fell back with stocks and this weighed on the dollar tone. Sellers of EUR came mostly via EUR-AUD in Asia, which was weighed by very heavy hedge fund liquidation. The EUR bias remains on lower levels into the ECB meeting on Thursday, but there are very strong bids into long-term moving averages, along with option support a little lower down.

    [USD, JPY]
    USD-JPY and the JPY crosses were underpinned. USD-JPY benefited from the underlying trend, which is skewed to a 100.00 break, while the crosses benefited from investment trust launches and repositioning. In particular, AUD-JPY saw heavy flows as the market prices out a RBA cut following yesterday's policy meeting and supportive data. It jumped from 90.00 to 90.75 and compares with 87.35 at Monday's Asia-Pacific open. The Japanese press said the BoJ will consider additional easing if the government goes ahead with the sales tax hike next year.

    [GBP, USD]
    Cable is still tied to option expiry territory near 1.5550. A move over 1.5600 during Tuesday's European morning was brief. Offers emerged ahead from 1.5605-10 and it reverted to lower levels due to underlying dollar strength. EUR-GBP bargain hunting re-emerged after 0.8450 barriers were extinguished. It traded at its weakest levels since May-21 and drew in corporate hedging. The attention today turns to U.K. services sector PMI, which will complete the current picture on the U.K. economy. We are looking for a moderation in activity after the strong gains in July.

    [USD, CHF]
    USD-CHF upside movement may slow, with several dollar pairings close to key levels. It has traded higher since the latter part of part of last week as the immediate threat of military action against Syria has receded and PMI data picked up around the globe. EUR-USD is hanging over long-term moving averages, which will be pivotal ahead of Thursday's ECB meet and Friday's NFP reading and USD-JPY is experiencing a battle ahead of the psychological 100.00 level. These pairings are more likely to drive USD-CHF rather than direct flows due to a lack of wholesale swissy selling amid near-term event/data risks, which are capping EUR-CHF ahead of 1.2350.

    [USD, CAD]
    USD-CAD found good support ahead of 1.0500 during Tuesday's North American session. CAD$ slipped back after news that bipartisan congressional support may be in pace for Syria strikes. In Asia there was also very good demand for AUD-CAD according to sources. The move is a symptom of repositioning by long-term AUD shorts that are now pricing out expectations of a RBA rate cut following yesterday's policy statement. USD-CAD is still skewed to higher levels, though very good offers from 1.0570 have provided a decent cap since the start of the week.

    Paste link in email or IM