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By XE Market Analysis July 9, 2013 6:45 am
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    XE Market Analysis: North America - Jul 09, 2013

    The USD, JPY and CHF moved lower in early trade as intra-day accounts responded to a rise in risk appetite. Asia markets benefited from yesterday's earnings report from Alcoa and a reduction in Eurozone risks as Greece got the go ahead to receive the next bailout tranche. EUR tested 1.2900 on decent demand for EUR-JPY and EUR-CHF. There was conjecture that SNB may be forced to take more aggressive action after last week's forward policy guidance from the ECB. GBP plunged to new trend lows under 1.4850 as the market got caught long over the release of very poor U.K. manufacturing and industrial production data. USD-JPY traded quietly around 101.20 for most of the European morning ahead of tomorrow's speech from Bernanke on economic policy and the BoJ policy decision on Thursday.

    [EUR, USD]
    EUR-USD was supported on dips. A pick up in equity markets in Europe weighed a touch on the dollar, but it was EUR strength against JPY and the CHF, which set the early tone, while EUR-GBP ramped up on weak U.K. data. EUR-USD made it up to 1.2898 highs in early European trade and then edged lower as offers held at 1.2900. Follow through in either direction is disappointing. Short term funds still keyed off the bearish underlying trend. The macro picture also points to further losses. The ECB backed an extended period of accommodative policy last week, while U.S. data reinforced Fed policy tapering expectations. However, EUR movement under 1.2850 is being stymied by corporate backed bids, but more importantly, large outstanding barriers at 1.2800 are still being well defended.

    [USD, JPY]
    USD-JPY consolidation continued overnight, leaving it just a short distance from 101.00, where more option maturities are rolling off for the second consecutive session. Japanese buyers underpinned into the top of the Ichimoku cloud around 100.75-80 today, leaving the bias on higher levels. The large majority of option barriers at 102.00 are reportedly rolling off today and could guide USD-JPY higher in the coming sessions. However, dollar buying momentum could remain limited ahead of tomorrow's speech from Fed Chairman Bernanke, which is expected to be on economic policy. On Thursday the BoJ is expected to leave policy unchanged, but should reaffirm its commitment to easy policy.

    [GBP, USD]
    The GBP market was caught long on poor U.K. production data. Cable dip buying forced a high just above 1.4980 into the U.K. data following a positive BRC retail sales number and more strong housing data overnight. The market was positioned for further signs of a U.K. recovery and this has exacerbated the GBP plunge, which forced Cable through 1.4850 barriers. EUR-GBP cleared April-17 highs at 0.8637 and option barriers at 0.8650. Cable may find interim support ahead of 2013 lows at 1.4832.

    [USD, CHF]
    EUR-CHF benefited on fund demand. Yesterday's close above 1.2400 for the first time in just over a month set the tone early on, along with a broad rise in risk appetite. Eurozone risks receded, while the market has temporarily put Fed policy risks aside and focuses on improving fundamentals and the Q2 earnings season. Local names forced EUR-CHF above 1.2420 and 1.2430 resistance and model funds triggered follow through on 1.2465. The move up in the cross helped USD-CHF to better than one-month highs around 0.9680. Flows related to outstanding option barriers are likely ahead of 1.2500 and 0.9700, respectively, although the underlying tone is skewed to further gains. Dollar longs are comfortably buying dips in anticipation of a move on parity by late Q3, while EUR-CHF could revisit highs from mid-May around 1.2650 if the EUR can stabilise.

    [USD, CAD]
    USD-CAD is still trading off its best levels, trading quietly at 1.0550, after peaking at 1.0585 on Monday versus last week's 1.0609 highs. Firmer equities provided some weight on the pairing, though it has met natural dollar demand on dips. Short term accounts are still positive on this pairing amid the underlying dollar tone. Bids should slow the decline towards 1.0530 and 1.0500 for a move back on the 1.0600 region.

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