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By XE Market Analysis September 10, 2013 1:38 am
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    XE Market Analysis: Europe - Sep 10, 2013

    The dollar maintained easier levels in Asia after it extended losses after yesterday's European close. Equity market investors took some encouragement that tensions surrounding the situation were easing up a bit as U.S. and other leaders debate how the situation can be resolved. There were no fresh leads overnight and the short term trend kept EUR above 1.3250. Cable traded close to 1.5700 after it reached 1.5733 highs at yesterday's London close. USD-JPY was sidelined near 99.50 after it stalled over 100.00 during Monday's Asian session. AUD steepened its bid to 0.9275 on a further reduction by shorts amid an improvement in China economic activity and better global market sentiment.

    [EUR, USD]
    EUR-USD traded in a fairly tight range, but the balance of risk was with the topside as global market sentiment remained positive and as the dollar maintained easier levels since last Friday's NFP release. EUR reached 1.3280 highs after yesterday's European close and this kept the downside underpinned throughout the Asia session. Buyers were noted around 1.3250 for most of the session, though it did not trade better than 1.3270 due to a congestion of sell-orders that are reportedly tipped from 1.3280 to 1.3300.

    [USD, JPY]
    USD-JPY experienced more sideways action following yesterday's failure to sustain a move over 100.00 due to good exporter selling and option related activity between 100.00 and 100.50. The technical backdrop also worked against the topside, but there was no appetite to force the issue during a quiet session on Monday. USD-JPY traded into the 99.30 region, but a pick up in risk appetite weighed on JPY and this kept USD-JPY stable throughout the Asian session. It edged up to 99.75 early on in line with a firmer EUR-JPY tone and demand for AUD-JPY. However, follow through was limited and it ebbed back towards 99.50, where more option strike congestion is tipped for today's N.Y. cut.

    [GBP, USD]
    Cable traded above 1.5700 on Monday for the first time since August-21. Underlying dollar weakness added momentum on the way up, although GBP has enjoyed stable-to-firmer levels since the BoE policy decision last Thursday. Some market participants took the lack of BoE statement as a sign that it will accept the rise in market rates. Some MPC members did say in the August BoE minutes that higher market rates was justified. BoE Carney is expected to be scrutinised on the issue when he faces the Treasury Select Committee this week. Specs may try to take Cable beyond long-term resistance near 1.5750 ahead of Thursday's appearance, which could set the backdrop for a sustained run higher. 1.5752 marks the top of the range on June-17.

    [USD, CHF]
    USD-CHF is looking more fragile since Friday's NFP data. During Monday's session it extended to 0.9301 lows, which were the lowest levels since the start of the month. A break of September-1 lows of 0.9298 is expected to trigger a bout of stop loss selling and this could fuel a more sustained period of dollar losses. Most of the movement since the start of the week came on a re-think on Fed tapering after Friday's NFP release. The Fed are still likely to carry out a small symbolic taper, but it may now be fully priced in and this is likely to be one of the reasons why the dollar is pulling back from recent highs.

    [USD, CAD]
    USD-CAD is still traded on the heavy side after it sliced through bids between 1.0385 and 1.0370 on Monday and extended to the 1.0360 area. The downturn was a symptom of general dollar selling, although CAD$ has also benefited from a resurgence in commodity bloc demand and better fundamentals. Yesterday's strong Canadian permits outcome also followed last week's better employment reading. Corporate bids are reportedly sitting from 1.0350, which slowed further downside, but trendline support is looking vulnerable and more stop loss selling could go through. Selling into strength looks like the favoured strategy now.

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