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By XE Market Analysis June 11, 2013 6:51 am
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    XE Market Analysis: North America - Jun 11, 2013

    The European morning session was dominated by deleveraging, which boosted JPY and CHF, but left the USD mixed overall despite U.S. 10-year yields reaching fresh 14-month highs. Asian markets fell after the BoJ left policy unchanged and failed to act to stem JGB market volatility. The sell-off gained momentum in Europe after the BoJ press conference, where Kuroda tried to pacify markets, but without action USD-JPY suffered. It sank from 98.00 to 96.50 in Europe versus 99.00 in Asia, which forced USD-CHF from 0.9335 to 0.9265. EUR-USD got a default bid via USD-JPY and tested 1.3300, but Cable pulled back from 1.5600 to 1.5550 on corporate support in EUR-GBP and yesterday's hawkish sounding remarks from Draghi. The commodity bloc currencies were weighed by more significant AUD losses as key support at 0.9380 gave way, which enabled USD-CAD to push back towards 1.0240.

    [EUR, USD]
    EUR-USD rallied into the 1.3300 region as USD-JPY losses guided intra-day moves. Direct eurozone influences were more limited today, leaving the focus on BoJ policy. EUR started the session the firmer side after yesterday's hawkish sounding comments from ECB's Draghi as attention shifted to the German court hearings on the eurozone bailouts and the ECB OMT program, which is still unused. ECB members played down weekend press reports that claimed there are limits to the amount of purchases that can be made. So far, there has been no negative fall out in the EUR and risk is on the topside. Last week's top around 1.3305 is a near-term target, along with February-25 highs around 1.3320. Note, that EUR-JPY losses could cut into the EUR-USD topside. Currently, the cross is trading close to 128.50 versus 130.50 just after the London open.

    [USD, JPY]
    USD-JPY selling intensified after the market was underwhelmed by comments from BoJ Governor Kuroda. He assured markets that the BoJ would remain flexibility in the wake of JGB market volatility, but did not offer any firm commitment after the BoJ left policy unchanged at today's BoJ policy announcement. The BoJ is currently watching the market, which echoes the recent MoF stance in the wake of increased price swings in FX and stock markets. Against this backdrop, USD-JPY added to overnight losses. It fell back from the 99.00 region in Asia to 97.80. In Europe it tumbled from the 98.00 region and filled in a combination of support and stop losses between 97.50 and 97.00 and reached 96.46 lows.

    [GBP, USD]
    Cable is underpinned on dips. During the Asian session it tested levels over 1.5600, but offers held and it corrected to 1.5535 ahead of U.K. industrial production data. A downturn in global equity markets underpinned the dollar tone, which got positive momentum from a rise in U.S. Treasury yields. EUR-GBP is also underpinned after it met very good corporate demand into 0.8500 on Monday and headed over 0.8540 today on general EUR support. U.K. data did not provide much directional guidance for GBP traders. After a run of better U.K. releases today's readings in manufacturing and industrial production were close to expectations. Activity remained on the low side for April after the March surge in activity, but forward looking PMI data suggests that things are starting to turn more favourable.

    [USD, CHF]
    CHF traded sharply higher on flight to safety as stocks tumbled in Asia and Europe. Heavy USD-CHF selling from 0.9350 to 0.9265 was the catalyst for stop loss interest via EUR-CHF, which broke 1.2350 and headed to 1.2307 lows. USD-CHF could come under further pressure on more stock market weakness, though a marked sell off in U.S. Treasuries lifted yields today and this could provide the dollar with a modicum of support on dips. Note, natural USD-CHF demand into the 0.9250 region, while there is further support at 0.9230 and 0.9200-10.

    [USD, CAD]
    USD-CAD headed to 1.0240 in Europe after good bids from 1.0180 to 1.0160 put a floor in place overnight and stock markets tumbled. The BoJ's steady policy hand hit stocks in Asia and in there was no respite in Europe as investors headed for safety. This weighed on the commodity bloc in favor of the USD, though movement across the G10 FX was mixed due to the fallout in USD-JPY and USD-CHF. USD-CAD should meet sellers towards the recent congestion zone from 1.0260, while support from overnight trade should keep the downside intact.

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