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By XE Market Analysis August 8, 2013 6:17 am
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    XE Market Analysis: North America - Aug 08, 2013

    The dollar added to recent losses in Europe. USD-JPY fell to 96.10 lows and was the catalyst for a EUR-USD move to 1.3368 highs in early trade. Follow through was limited by sovereign selling, while USD-JPY also met very strong bids from trust banks, which kept the dollar within a tight range. Risk appetite got a boost overnight from much better than expected China trade data. Exports rose 5.1% from a year ago and imports surged 10.9%. The data enabled AUD to overcome a disappointing 10.2k drop in Australia employment and it moved to 0.9090 highs. The BoJ policy outcome was a non-event as widely predicted and BoJ Governor Kuroda did not provide anything new. He said it would act if needed and urged fiscal discipline from government policymakers.

    [EUR, USD]
    EUR-USD triggered buy stops. Dollar selling was an early driver through 1.3350 barriers and boosted demand from model fund types. The upturn extended to the 1.3370 area, where a U.S. account was noted on top. The upturn in the EUR is still relatively slow though as this uptrend goes against the macro theme. There is positive guidance from European markets following good China trade data overnight and position traders are looking for a push back towards June 18-19 highs around 1.3415, where EUR hit a double top and marked the start of the downtrend, which extended to 1.2750 on Fed taper risk.

    [USD, JPY]
    USD-JPY met a concentration of orders ahead of 96.00. Offshore selling met very large bids from Japanese trust banks layered from 96.20 down to 95.80, according to sources. There is also speculation that a 96.00 barrier may be live as this level has held since July-19. The post-BoJ press conference from Governor Kuroda maintained that action would be taken if tail risk threatened the BoJ's price target. Kuroda warned that the impact of monetary easing could be diminished by loosening of fiscal discipline. Adding to the current price chop in USD-JPY were reports of an earthquake in the Nara region, though initial fears over the size and impact have been played down.

    [GBP, USD]
    GBP is consolidating Wednesday's gains. Cable is trading comfortably around 1.5500 and EUR-GBP is close to 0.8600 following the outsized rally over the BoE Inflation Report. Details on formal policy were unveiled. Easy policy will be maintained until the employment rate reaches at least 7%, though this was contingent on the inflation outlook, which is currently running above the BoE's 2% target. The BoE believes that based on current conditions that policy signals are unlikely to change until early 2016. However, the market viewed the report with scepticism based on the accelerated improvement in the U.K. economy and money market rates and sterling rose. Carney has been talking on BBC radio today and said the new guidance was about achieving the inflation target in a balanced and responsible way and policy will be guided by what happens on the ground. Carney said it has provided the maximum amount of transparency to secure the recovery.

    [USD, CHF]
    USD-CHF found local buyers after the 0.9200 breach. An early dollar push lower triggered sell stops, but losses were limited to 0.9190 as the downturn slowed. EUR-CHF turned away from the 1.2285 area and moved back to 1.2300 on local name demand. Both the cross and the dollar pairing look vulnerable, but with European stocks on a firm footing appetite to run large swissy long positions may ease.

    [USD, CAD]
    USD-CAD consolidated after it broke the top of the recent range on Wednesday amid a fall in risk assets and weak domestic data. In today's session risk assets have performed well as China trade beat expectations and good earnings results in Europe. USD-CAD edged back towards 1.0400, though the recent upswing, along with the fall in domestic data has kept the downside intact so far. Failure to clear large 1.0450 offers has raised speculation of outstanding option barriers.

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