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By XE Market Analysis August 13, 2013 6:27 am
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    XE Market Analysis: North America - Aug 13, 2013

    The dollar held on to a steady to firmer tone throughout the session. The upturn was compounded by a move higher in U.S. yields and USD-JPY firmness. JPY keyed off a 2.43% rally via the Nikkei 225 as the Japanese press tipped a corporate tax cut and led the move from 97.00 to 98.00. EUR-USD maintained tight ranges close to 1.3300 as dollar firmness was offset by a surge in German ZEW investor confidence and a rise in Eurozone industrial production. Cable consolidated around 1.5450 as U.K. CPI came in at 2.8% y/y, which was in line with expectations. The commodity bloc currencies did not benefit much from equity market gains as dollar strength capped AUD under 0.9150 and CAD headed back to 1.0330.

    [EUR, USD]
    EUR-USD received a mild lift amid a surge in German ZEW investor confidence data and a pick up Eurozone industrial production. EUR rose from 1.3280 to just over 1.3215, but is currently consolidating gains. In light of the data the EUR upturn has been relatively subdued. One of the consequence is USD-JPY's underlying bid tone amid the overnight Nikkei surge and also today's pick up in U.S. yields as most market participants are now coming round to the idea that the Fed are more than likely to taper policy in September. EUR-USD's inability to clear very strong resistance from 1.3400-20 last week has also left a bearish sloping patter on the daily chart since late last week.

    [USD, JPY]
    The USD-JPY bid steepened as U.S. fund offers gave way between 97.60 and 97.70. The move higher in USD-JPY came after the Nikkei Daily suggested that PM Abe was considering a corporate tax cut to counter the sales tax hike. Other politicians in the last 24 hours have also called for a delay in the sales tax change in light of yesterday's weaker than expected Q2 GDP data. Japan's Nikkei surged 2.43% and carried USD-JPY up from the 97.00 region. There are offers anticipated from 97.85, which is a minor resistance level from August 5 lows, as well as Japanese orders across 98.00. The tone has shifted back to the topside amid today's gain and after USD-JPY held on to 96.00 yesterday.

    [GBP, USD]
    Cable headed higher after U.K. CPI. The pair headed to 1.5435 ahead of the release and then jumped to 1.5475 as the July headline reading came in at 2.8% y/y, which was in line with expectations. Input prices came in weaker than expectations at 5% y/y, but was still up from 4% previously. Output prices met expectations at 2.1% from 2% previously. Cable may see option expiries influence movement into the N.Y. session amid more 1.5450 and 1.5500 expiries. The recent failure to sustain a move over the 200-dma above 1.5530 should also see selling pressure on strength and several offers were lowered into the 1.5500 area yesterday from 1.5550. After 1.5440 support gave way ahead of the release there are more bids noted at 1.5415 and 1.5400.

    [USD, CHF]
    CHF maintained an easier tone, guided by broader USD movement initially and then Eurozone data. A USD-CHF upturn on Monday enabled EUR-CHF to gain a foothold over 1.2300 and it extended to the 1.2330 area by today's European open. USD-CHF edged up through 0.9290 early on then pulled back to 0.9270. However, EUR-CHF has built on gains and is closing in on near-term resistance at 1.2350 as the EUR benefits from a jump in the German ZEW and Eurozone industrial production, which rebounded after the dip in May. The move lower in CHF is in line with a rise in risk appetite, which has encouraged a pick up in speculative flows, though volumes are still well down from normal trade due to thin summer markets.

    [USD, CAD]
    USD-CAD was boosted by the firmer dollar tone. After finding support close to 1.0300 overnight it headed to 1.0330, where fund offers were noted on Monday. USD-CAD saw two-way chop between 1.0320 and 1.0330 after it headed higher. Thereafter ranges tightened up as dollar firmness was offset by the rise in risk appetite. Bids layered from 1.0280 and larger support at 1.0265 to 1.0245 should keep the downside in check and since last Friday's fall in Canadian jobs USD-CAD may have more scope for higher levels. For intra-day accounts, the post-jobs spike around 1.0350-55 is a potential target and buy stops are likely behind these levels.

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