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By XE Market Analysis June 14, 2013 5:37 am
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    XE Market Analysis: North America - Jun 14, 2013

    Sentiment improved overnight as Asian stocks closed on a positive footing after the Nikkei rebounded, which supported USD-JPY close to 95.00. In Europe, activity was very low after the marked rise in volatility earlier in the week. The dollar was supported against EUR and GBP on profit taking, which forced a move under 1.3320 and 1.5620, respectively. The EUR topside was capped by option exposure, while Cable was weighed by corporate flows. The highlight in Asia was the latest Hilsenrath column, which suggested that Bernanke will use next week's meeting to stress that any move lower in the pace of QE won't mean the Fed is close to ending the program. Japan PM Abe's growth plan was approved, but the lack of fresh details suggested that some of the reforms could be watered down to appease internal opposition.

    [EUR, USD]
    EUR-USD tested the downside as option related selling capped. Offers were noted from 1.3380 overnight and it did not trade much higher than 1.3350 since the European open. An outstanding 1.3400 barrier will expire today, part of a double no touch option, but there are further digital options that run into next week and may still limit the upside. There wasn't much guidance from stocks in Europe, which were consolidative despite a positive close in the U.S. on Thursday and a decent rally in Asia. The latest piece from Fed watcher Hilsenrath said the Fed would push back against market expectations of a rate increase. It weighed on the dollar in early Asia, but the dollar was supported for most of the session. European account demand should emerge into 1.3300 and yesterday's N.Y. morning low at 1.3280.

    [USD, JPY]
    USD-JPY experienced another very choppy session. After squeezing out early highs of 95.80 it lurched lower to hit 94.43 lows as Japanese stocks initially struggled to sustain higher levels. However, sentiment improved in the Asia afternoon as the Diet passed PM Abe's growth plan and also promised more measures after the Upper House elections in July. The Nikkei closed more than 3% higher, which left USD-JPY above 95.00 by the time early European accounts entered the market. However, market doubts over BoJ policy and its ability to manage market volatility may dampen USD-JPY's ability to rise. The large flight out of Japan into overseas assets, which was expected earlier in the year, has also failed to materialise.

    [GBP, USD]
    Cable was weighed by profit taking, taking it down to 1.5640 versus 1.5715 in early Europe and yesterday's N.Y. session high at 1.5738. Corporate flows were also evident on the way down and U.K. clearers were both active out of N.Y. on Thursday and since the European session got underway today. Hedging picked up after the 200-dma around 1.5700 gave way earlier this week, while outstanding option barriers are also noted at 1.5750. Order book support is tipped at 1.5640 and 1.5600-10, while from a technical standpoint Cable is still skewed to further upside movement and any correction is seen as a buying opportunity.

    [USD, CHF]
    The CHF has settled at easier levels as risk appetite improved in N.Y. on Thursday and sentiment held up in Asia. EUR-CHF is trading firmly above 1.2300 and USD-CHF is underpinned above 0.9200. It's likely that stocks will be a heavy influence into the weekend given the recent volatility. Specs may be tentative buyers of risky positions intra-day, but may be reluctance to run aggressive exposure into the weekend. This could limit the EUR-CHF upside over 1.2350, while USD-CHF may pullback a bit after the latest column from Fed watcher Hilsenrath play down Fed policy tapering fears.

    [USD, CAD]
    USD-CAD steadied after stops through 1.0145 held during Thursday's session. However, the upturn in risk appetite in Asia is likely to keep the balance of risk on the downside. Short term selling was noted ahead of 1.0190 in late Asia and more offers are noted across 1.0200, which were lowered from 1.0220-30 yesterday. A move through 1.0145 would accelerate demand for CAD$, though it may be depended on how AUD performs in Europe. There are natural bids anticipated ahead of the 1.0100 region.

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