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By XE Market Analysis June 10, 2013 6:29 am
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    XE Market Analysis: North America - Jun 10, 2013

    The European morning was relatively quiet compared with the heavy price chop seen in the latter part of last week. European markets keyed off the Nikkei's 5% surge and the stability in USD-JPY, which took it over 98.75. AUD was weighed by China data, which provided evidence that China is slowing, though the impact on other currencies was muted overall. EUR was stable close to the 1.3200 area. Eurozone data was mixed, with French production numbers coming in on the firmer side, but Italian readings disappointed. The debate on the ECB's bond buying program picked up ahead of the German constitutional court hearing on OMTs. There was no lasting impact from weekend press reports that suggested the ECB could limit the extent of its unused program, which was denied by the ECB. Meanwhile, Cable remained stable ahead of 1.5500, while the CHF consolidated after it dipped against the EUR and USD in early trade.

    [EUR, USD]
    EUR-USD is trading close to 1.3200 after it failed to make progress in either direction since the European session got underway. A pick up in dollar demand was noted in the Asian afternoon and EUR backed away from 1.3230 and headed under 1.3200 after the European open. The impact from weekend press reports related to the ECB's bond buying program has been limited so far. However, if there are restrictation over the ECB's progam, as reported, it could undermine confidence in the eurozone and weigh on the EUR. So far, better than expected production data from France provided a modicum of support after 1.3180 gave way initially and it headed back to the 1.3215 area. However, note speculative positioning is far more balanced now and there may be increased scope on the EUR downside than noted in previous weeks. Friday CFTC data revealed a 38% reduction in EUR shorts and a 13% fall in USD longs.

    [USD, JPY]
    USD-JPY extended overnight gains to trade above 98.75 as a mixture of offers and stops were filled from 98.50. USD-JPY performed well overnight after the Nikkei surged 5%. As well as the positive risk backdrop short term players were encouraged by Friday's rebound out of 95.00 and back above the Ichimoku cloud. It does look like some accounts are nervous to run short dollar positions ahead of tomorrow's BoJ decision, but there could be a volatile reaction. Japanese data has shown improvement since Japan embarked on its new and more aggressive policy stance and an unchanged outcome is anticipated. The accompanying press conference is likely to be more important for USD-JPY traders. Kuroda should continue to back the ultra-easy stance and may comment on the recent volatility in stock and bond markets. Note, USD-JPY offers into the 99.00 region, while short term bids are seen into 98.00 ahead of very strong support at 97.50 to 97.30.

    [GBP, USD]
    Cable was supported into 1.5500. A modest correction from 1.5565 to 1.5495 was noted since the Asian afternoon as dollar buying picked up. However, in Europe a pick up in European stocks weighed on the dollar tone. Cable also got added benefit from a large 1.5500 expiry rolling off today, as well as last week's positive U.K. data, which suggested that the U.K. economy may be doing a bit better than the BoE has predicted. There are near-term offers from the 1.5535 region, as well as from the Asian peak at 1.5565. The 1.5600-05 level is going to be a pivot point intra-day as this represents Friday's N.Y. session high after it stalled just short of the 200-dma at 1.5707 last Thursday.

    [USD, CHF]
    EUR-CHF is supported on dips today. A pick up in stock markets in Asia and Europe added further weight on the CHF following Friday's mark down, which came in the wake of U.S. NFP data. EUR-CHF firmed up from 1.2350 overnight and an early stop hunt was noted as local name demand went through. Two Swiss accounts fished for stops in EUR-CHF through 1.2400 and lifted USD-CHF out of 0.9375 to 0.9410. Once the orders were filled both the cross and the dollar pairing reverted to European open levels around 1.2380 and 0.9370, respectively. There was a limited reaction to the press report that suggested the ECB may set firm limits on the extent of it unused program to buy government bonds. However, fresh uncertainty in the eurozone would trigger a flight back into the CHF and send EUR-CHF back into 1.2300 and below.

    [USD, CAD]
    USD-CAD settled back below 1.0200 in Europe after it was unable to reassert itself on the topside. USD-CAD experienced sharp price swings on Friday after the twin U.S./Canada employment reports, trading under 1.0170 from 1.0240. The outsized Canadian jobs gain was responsible for the bulk of the CAD rally, though there was a bit of a sigh of relief from the U.S. side as well. USD-CAD did rebound back to the 1.0220 region, but has struggled to sustain higher levels as firmer stock markets supported CAD$, leaving it close to 1.0180 into the North American open.

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