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By XE Market Analysis July 11, 2013 6:29 am
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    XE Market Analysis: North America - Jul 11, 2013

    The dollar plunged overnight after dovish comments from Fed Chairman Bernanke. This followed yesterday 's FOMC minutes, which highlighted a range of views on tapering, but many members wanted more evidence on jobs. The pace of the dollar sell-off was exacerbated by thin conditions as most of the action came at the Asia Pacific open, where liquidity is often at a very low ebb. EUR surged from just under 1.3000 over 1.3200, but a correction was noted as central banks bought the dollar at session lows. This continued into the European session and the dollar corrected oversold levels. Overall, it remains well below yesterday's highs. EUR ended the European morning at 1.3050, Cable above 1.5100, USD-JPY was supported over 99.00 and USD-CHF is at 0.9500. On the macro front, ECB repeated rates would stay low for an extended period of time, adding that the scope for cuts is not exhausted. BoJ left policy unchanged as expected and upped the economic outlook. China Premier Li said economic growth and employment must stay above a certain floor, which gave hope that China will not allow the slowdown to run too far.

    [EUR, USD]
    EUR-USD posted a correction. After surging to 1.3207 highs in Asia it spent the early part of the European session on the back foot. An Asian central bank sold from the 1.3150 region, while Asian based intra-day accounts booked profit. Real money activity has picked up, according to sources, leaving the EUR close to 1.3025, where short term support is noted. The EUR rally came in very thin trade and where there was reasonable liquidity most of the activity has favoured EUR selling and USD demand. Short term technicals may have improved the EUR picture. However, macro fundamentals are still much better in the U.S. than the Eurozone and Bernanke may have provided better levels for long-term dollar bulls.

    [USD, JPY]
    USD-JPY bottomed out at 98.25 following sharp losses from over 99.50 in Asia, which compared with levels over 100.50 ahead of the FOMC minutes. Very large Japanese importer bids put a floor in place ahead of the bottom of the Ichimoku cloud at 98.15, while hedge fund dollar demand picked up, with the long-term trend still intact based on fundamentals. The BoJ policy outcome was not a market mover. Policy was left unchanged and it upped the assessment on the economy. BoJ Governor Kuroda said the BoJ will make policy adjustments as needed, but there are growing expectations that the BoJ may not need to adjust policy further in order to meet its growth and inflation targets.

    [GBP, USD]
    Cable is trading close to 1.5100 following the pullback from 1.5194 overnight highs back to 1.5065 after the European open. Cable is still firmer on the session, having jumped from just ahead of 1.4900 at the N.Y. close. Yesterday's key day reversal and subsequent policy rhetoric from Bernanke should encourage light demand on dips. Option support is noted around 1.5070 expiries and buyers are tipped between 1.5050 and 1.50000. However, GBP is struggling to sustain higher levels against the USD, like the other majors, and there is limited upside from 1.5125 to 1.5150 due to sovereign account offers.

    [USD, CHF]
    USD-CHF is in a holding pattern close to 0.9500. Dovish comments from Fed Chairman added momentum to the dollar sell-off, which started over the FOMC minutes. The dollar pairing fell from over 0.9650 to reach 0.9406 lows. Early European names could not overcome a strong bid from fund names, while the dollar corrected oversold levels. The USD-CHF move helped EUR-CHF to stabilises close to 1.2400 following the sharp pullback from 1.2450 to 1.2370 overnight. After the fallout from the FOMC and Bernanke the market will look to economic data in order to determine near-term direction. Intra-day, there are USD-CHF buyers from 0.9470 and offers ahead of 0.9550. EUR-CHF may struggle towards 1.2430-40 initially and offers increase over 1.2450.

    [USD, CAD]
    USD-CAD losses extended to 1.0325 in Asia amid heavy dollar selling. Good bids put a floor in place into the European open and dollar corrected from oversold levels carried it back through 1.0380. USD-CAD may run into selling pressure on moves into 1.0400 and 1.0420 initially as the short term technical picture shifted dramatically on the Fed and Bernanke.

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