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By XE Market Analysis August 9, 2013 5:59 am
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    XE Market Analysis: North America - Aug 09, 2013

    The dollar mostly consolidated recent losses, leaving EUR just shy of 1.3400 and Cable around 1.5550 during the European session. USD-JPY showed modest improvement as Asia sentiment benefited from another round of more upbeat China data, leaving it around 96.50. China retail sales rose 13.2% y/y versus a 13.5% median and industrial production rose 9.7% y/y versus a consensus of 8.9%. This helped AUD to extend the recent recovery to 0.9150 on position reduction. Meanwhile, there was more evidence of a sustained recovery in the U.K. economy as a 4.9% surge in June exports saw a narrowing in the trade deficit to GBP 8 bln. Elsewhere, USD-CAD edged through 1.0300 ahead of the key Canada jobs report.

    [EUR, USD]
    EUR-USD consolidated the recent rally, leaving it close to the 1.3380 area. The EUR traded as high as 1.3401 and then drifted lower as very strong offers put a top in place. U.S. names have a very heavy concentration of bids at 1.3350, which are protecting short term stops at 1.3340. Sovereign names were active on the way up yesterday, while real money and U.S. corporate flows have been cited. Similar interest is tipped into 1.3400 today, which lies ahead of the 200-week MA at 1.3402 and the double top from June 18-19 at 1.3415-20. The short term is still pointing higher, but ahead of the weekend profit taking may pick up if these levels hold. Looking ahead there may be a limited window for EUR-USD upside if Fed taper expectations rise into September NFP data and then the FOMC meeting.

    [USD, JPY]
    USD-JPY benefited from stock gains. Nikkei closed around flat after it clawed back intra-day losses, which was a late positive. Most of the early running in Europe is due to China data as industrial production beat expectations and retail sales held up. Asian commercial flows lifted USD-JPY from the 96.35 region and it moved back to 96.80. However, offers into 97.00 are noted from leverage names and retail investors and the pair is vulnerable following Thursday's drop to 96.81 lows. On the downside, orders have been reset between 96.20 and 96.00, though the big interest remains at 95.80 and 95.50, where both bids and stops lie.

    [GBP, USD]
    Cable consolidated the recent rally. It traded on a firm footing since the European open, but met very good offers ahead of yesterday's 1.5574 top. Reserve managers are active in either direction. An Asian name was an early seller down to 1.5530 and met a Middle Eastern account on dips. Cable's rally since Wednesday's BoE Inflation Report reportedly came on exceptionally high volumes, suggesting that long-term shorts were cut back as interest rates rose in the wake of the BoE's forward guidance. It will be interesting to see if Carney takes the opportunity to push back against the "unwarranted rise in rates" in the coming months if this move continues. Meanwhile, U.K. trade data posted a narrower than expected deficit to GBP 8 bln as exports surged by nearly 5% and another welcome development for the economy.

    [USD, CHF]
    CHF struggled to sustain easier levels, which was also the case on Thursday when European and U.S. markets rallied. The CHF's inability to move lower is a symptom of dollar weakness. USD-CHF still looks heavy around 0.9200 after it dropped to 0.9175 over Thursday's London close and should meet sellers on upticks. This forced EUR-CHF from 1.2315 back below 1.2300 and it is consolidating in tight ranges around the figure today. European stocks have also reverted to softer levels after getting minor support on the back of China data.

    [USD, CAD]
    USD-CAD remains heavy close to 1.0300 after Thursday's break lower on broad based dollar selling. Overnight, this theme continued as more better than expected China data boosted the commodity bloc currencies. After starting the European session close to 1.0330 it headed to lows just under 1.0300 ahead of today's Canada job report. There is minor chart support at 1.0280 and bigger support levels at 1.0250-60 that could come into play on a strong reading. The upside is limited now after it was unable to sustain a move over 1.0400 earlier in the week.

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