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By XE Market Analysis June 13, 2013 6:25 am
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    XE Market Analysis: North America - Jun 13, 2013

    The European morning experienced a modest correction from some of the overnight moves. A Nikkei move into bear market territory was the catalyst for steep opening losses for European markets, but following through was limited. Stock markets steadied, albeit in negative territory, led by a rally in the Nikkei futures market, which encouraged a USD-JPY rebound from 93.80 to 94.30 versus Asia highs over 96.00. EUR-USD turned away from 1.3390 below 1.3330 as the USD corrected and there was similar repositioning via the CHF and the commodity bloc currencies. AUD-USD experienced very heavy flows on hedge fund profit taking from 0.9440 to 0.9540 and USD-CAD crashed from 1.0225 towards 1.0150 on Asian sovereign selling.

    [EUR, USD]
    EUR-USD gave back early gains as offers held into 1.3400. Central banks were noted on top, but the downturn was largely due to a lack of direct EUR-USD demand. EUR-USD benefited on a default bid as an accelerated deleveraging weighed on USD-JPY and USD-CHF overnight. Most of the EUR flows have been cross related as overnight losses in EUR-JPY and EUR-CHF competed with EUR-AUD gains. However, some of these moves are being reversed since the European open on profit taking. EUR-USD should remain a buy on dips and the pullback from 1.3390 to 1.3335 met European interbank demand. More bids are noted from 1.3320 and through the 1.3300 region.

    [USD, JPY]
    USD-JPY steadied after it bottomed out at 93.80 after the European open. The plunge in USD-JPY from over 96.00 in Asia came after the Nikkei 225 lost more than 6%, leaving it in bear market territory. In Europe, the futures market steadied, which fueled Tokyo backed bids, while there was hedge fund profit taking in the crosses and option related flows in the dollar pairing. It is possible that it will recover towards 95.00 amid a very large 95.00 digital option expiry. Usually, these structures payout when spot is trading either at the strike level or above/below depending on the position. Offers related to this interest should begin to enter the market from the 94.65-70 area.

    [GBP, USD]
    Cable eased on profit taking, which reflected a steadier tone for European stocks after the sharp discount at the open. A brief Cable move over 1.5700 overnight was unsustained and London names reset large offers at this level. In the first hour of London trade a decent EUR-GBP bid knocked Cable to 1.5660 and it settled for a time in a sideways trading pattern before edging out 1.5645 lows. The underlying tone for Cable is positive, but it is overbought on the daily chart and EUR-GBP should meet dip buying amid persistent talk that Vodafone could buy Kabel Deutschland. Close-to-market stops for Cable are noted through 1.5630 and 1.5600. Longs that are playing the range are still positioning for a sustained push through the 200-dma and buy stops at 1.5710.

    [USD, CHF]
    The CHF is supported, but a good EUR-CHF bid fueled a small correction. EUR-CHF fell from 1.2280 overnight and threatened large bids at the 200-dma at 1.2220 by early Europe. However, Nikkei futures pulled back from intra-day lows and European stocks did not adde to early losses, which helped EUR-CHF and USD-CHF higher. The dollar pairing bounced out of 0.9130 towards 0.9200 after support levels at 0.9110-20 held, while the cross made it back to 1.2175. However, there are doubts over whether EUR-CHF and USD-CHF can hold on to these levels if stocks markets unravel further. The SNB will be watching nervously. Of late it has highlighted the importance of its FX policy stance, particularly with deflationary headwinds still persisting.

    [USD, CAD]
    USD-CAD was weighed by Asian sovereign sales. The pair crashed from 1.0225 in early Europe to the 1.0180 region after short term sell stops were triggered through 1.0190. Thereafter it extended losses as stocks stabilized after opening losses in Europe. USD-CAD received a small bid in the Asia afternoon from 1.0195 up to 1.0225 amid news that Sobey's will acquire Safeway's assets in Canada for $5.7 bln. Substantial dollar inflows could go back to the U.S, but the deal will come under review by the Canadian Competition Bureau later this year. The USD-CAD downside should slow from here amid a plethora of bids towards 1.0150, which held on Wednesday. Heavy stops could feature if 1.0150 gives way.

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