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By XE Market Analysis September 19, 2013 3:39 am
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    XE Market Analysis: Europe - Sep 19, 2013

    The dollar is consolidating after it posted very deep losses on the surprise unchanged Fed decision. It gave fresh life to risk assets and emerging markets, which had suffered on prior taper risks. The downturn in U.S. yields weighed heavily on USD-JPY in N.Y. hours, but Japanese accounts were decent buyers under 98.00 amid the rise in risk appetite. However, USD-JPY could experience limited upside if yields remain upwardly challenged. EUR and Cable are both holding firm above 1.3500 and 1.6100, respectively. They are both due a correction, arguably. However, the Fed outcome was a game changer for the near-term and we anticipate a prevailing buy-on-dips strategy. A full data/events calendar is due in Europe and the U.S. The SNB and Norges Bank should keep policy unchanged and there is U.K. retail sales and the CBI industrial trends survey to digest. Bond auctions from France, Spain and the U.K. could encourage real money demand for respective currencies. The data dependent Fed outlook will see the focus firmly on jobless claims, Philly Fed, home sales and leading indicators.

    [EUR, USD]
    EUR-USD was well supported from the Asia open after it rallied from 1.3380 to 1.3542 highs on the Fed. In early Asia light profit taking fueled a move back into the 1.3500 region, but the underlying dollar tone lifted it back to the 1.3540 area. Upward momentum was limited around the 1.3530-40 region due to very large 1.3550 offers, which are reportedly related to outstanding option barriers. However, yesterday's surge and the unexpected Fed policy decision should leave bias firmly on the topside.

    [USD, JPY]
    USD-JPY was supported under 98.00 following the sharp drop from 99.00 to 97.76 in the wake of the Fed decision. Japanese buyers were prevalent and there was heavy interest for the JPY crosses. AUD-JPY rose fro 92.50 to 93.35 in the N.Y. afternoon and edged out highs of 93.49 in Asia. EUR-JPY added nearly a big figure in the Asia time zone to trade out of 132.35 to 133.20 amid the rise in risk appetite. This helped USD-JPY back to 98.47 highs, though the deep drop in U.S. yields limited upside momentum in the dollar pairing.

    [GBP, USD]
    Specs were positioned for a GBP range break ahead of the Fed. The lack of taper from the Fed, and dovish policy guidance, when taken together with today's less overtly dovish BoE stance, pointed to more Cable upside. Cable sliced through resistance at 1.6025 and 1.6050 and took out more option barriers at 1.6100 and 1.6150. The buy on dips mentality should prevail, though given the price action since Wednesday's N.Y. morning some consolidation may be warranted.

    [USD, CHF]
    EUR-CHF is marking time near 1.2350 ahead of the SNB decision, where a steady policy hand is also expected. The USD-CHF plunge towards 0.9100 has negated EUR-CHF's ability to rally. The dollar pairing is likely to guide action initially, though the rise in risk appetite should ensure that the EUR-CHF downside is limited to the 1.2300 region.

    [USD, CAD]
    USD-CAD broke 1.0200 option barriers by early Europe as a rise in risk appetite and the dovish Fed tone weighed heavily on the dollar pairing. USD-CAD posted small recovery from 1.0202 to 1.0233 in early Asia, but upticks were sold into. A downward bias should remain for the time being, though some corporates could take advantage of the weakest levels since June-19 and support is noted into 1.0175.

    Replies: XE Market Analysis: Europe - Sep 19, 2013

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      TheApostle's picture
      TheApostle Posts: 2
      Nice comments, here is my view:

      EUR/USD Bullish, R 1.3400/1.3450, St 1.3290/1.3225

      EUR/CHF Bearish, R 1.2393/1.2415, S 1.2340/1.2295

      USD/JPY Bearish, R 99.55/100.00, S 98.20/97.75

      GBP/USD Overbought, R 1.5965/1.6060, S 1.5850/1.5775

      The sharp selling seen into the close yesterday suggests that the rise is likely to become more choppy. That said, I am maintaining a bullish view while above 1.3290 for a probe into 1.3400/50 before a top can form. 

       The small Hammer formed yesterday turns us neutral. The range is likely between 98.50 and 100; within the range, I prefer selling rallies for the time being. 

      I am targeting 1.6000/60 before a pullback can unfold. Short-term support is at 1.5840. The bid is likely to be fuelled by rising stocks and the pullback in US yields. 

      Smile and trade boys, smile and trade.

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