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By XE Market Analysis July 12, 2013 7:01 am
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    XE Market Analysis: North America - Jul 12, 2013

    It was a session of consolidation for the FX majors following the sharp moves on Wednesday and Thursday. USD-JPY traded a tight range close to 99.00. EUR-USD and Cable were weighed by light repositioning as close-to-market stops influenced. The AUD came under pressure following overnight remarks from China finance minister Lou, who said growth would average 7% this year, below the official 7.5% target, which raised expectations that Monday's Q2 GDP would be weaker than expected. CHF barely moved as EUR and USD fluctuations left EUR-CHF at 1.2400. It was a quiet data calendar. Eurozone industrial production was the highlight and it dipped for the first time in four months, but did influence market movement.

    [EUR, USD]
    EUR-USD filled close-to-market stops and then turned higher in quiet trade. Early dollar demand forced EUR through 1.3050 stops. However, further losses were contained by bids towards 1.3030, leaving it close to 1.3050. Eurozone industrial production data came in at -0.3% m/m, which was close enough to expectations and did not impact FX. There is EUR demand still ahead of 1.3000 from short term model funds and a sovereign name turned a short position from Thursday. Trading activity is uninspiring though after Bernanke stopped out most market participants on Thursday and directionless trade is noted ahead of the N.Y. open.

    [USD, JPY]
    USD-JPY is trading within ultra-tight ranges. Trading activity is very light as most large accounts are on the side lines following a session of consolidation in Asia, which has carried into Europe. Tokyo are closed on Monday for a long weekend and there are no fresh positions being established. In Asia, importer demand carried USD-JPY through 99.30, but offshore selling and more gamma related hedging kept it close to 99.00, where more large option expiries roll off today. It is notable that after yesterday's N.Y. options cut relatively heavy dollar selling went through, though until 98.20 support gives way this should not reflect a shift in the underlying trend.

    [GBP, USD]
    GBP lost ground on fund selling. Cable fell from 1.5175 to 1.5120 on the back of an Asian fund sell order. Since Cable rebounded out of trend lows of 1.4814 on Tuesday it has met decent sell interest over 1.5100 and close to 1.5200. Sovereign names have been quite active, particularly on Thursday. Today's action is pushing against momentum studies, which were initially turned to higher levels, but the dollar is also seeing a pick up in demand as stocks struggle ahead of the weekend. Meanwhile, EUR-GBP ran into a decent bid from 0.8610 following the correction from the 0.8795 area on Thursday.

    [USD, CHF]
    The CHF barely moved overall, with repositioning via the USD and EUR noted ahead of the weekend. EUR-CHF is still trading a very narrow range close to 1.2400 as the downturn in the EUR was offset by a USD-CHF move out of 0.9460 back to 0.9500. The market has now fully digested the FOMC minutes and remarks from Bernanke. Overall, we think the dollar probably has more scope for an extended push on higher levels in the longer term. However, after very large positions were flushed out in early Asia Pacific trade on Thursday there is no appetite to reload positions. There are more Fed members speaking later today, which could inject some volatility into the weekend.

    [USD, CAD]
    USD-CAD ranges have narrowed up considerably. After swinging between 1.0520 and 1.0320 since late Wednesday movement has slowed in the middle of the 1.03 handle. Dollar selling forced the pair down from 1.0400 in yesterday's N.Y. afternoon and it headed to 1.0360 in Asia. Equity markets are mixed currently and the FX market has a more defensive tone ahead of the weekend, which should reduce CAD$ inflows.

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