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By XE Market Analysis June 17, 2013 6:54 am
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    XE Market Analysis: North America - Jun 17, 2013

    The dollar was led higher in Asia by USD-JPY gains as intra-day accounts keyed off a Nikkei rally for the second consecutive session. The move higher weighed on EUR-USD over 1.3350, while AUD-USD experienced a short squeeze above 0.9600 on broad equity market gains. Movement over the European session may be on the quieter side as the G8 meeting gets underway tonight from Northern Ireland. Wednesday's FOMC meeting is also in focus, with Fed policy the subject of intense speculation over the last few weeks.

    [EUR, USD]
    EUR-USD is trading on a stable footing at the top of the intra-day range. Activity has been very low since the start of the European session. A narrow range was noted in Asia, with most of the action centered around USD-JPY and AUD-USD flows, leaving EUR-USD largely sidelined. It edged down from 1.3355 in Asia and traded into 1.3315-20 by early Europe. An easier dollar tone lifted it back to 1.3350 ahead of the N.Y. open, close to where a congestion of option strikes are noted. A rangebound trading theme could continue into the FOMC outcome on Wednesday, but beyond then there may be scope for much larger ranges after a significant reduction in speculative positioning over the last week or so. CFTC data released on Friday revealed an 85% reduction in EUR short positions.

    [USD, JPY]
    USD-JPY traded close to 95.00 following the overnight rally out of the 94.00-10 area. Sentiment is positive after the Nikkei closed 2.73% higher and Europe stocks also rallied. However, FX activity was slow due this week's prevailing event risks, which include the FOMC meeting. Option expiries at 95.00 could dampen follow through activity, though the balance of risk should remain with the topside if stocks sustain higher levels. Direct USD-JPY flows have been limited, but tentative interest for the JPY crosses was noted since the European open, which fueled a EUR-JPY move up to the the 126.80 region from 126.10. USD-JPY offers are tipped into the 95.30-40 region and over 95.50. Larger Asian fund order flows is anticipated into 96.00.

    [GBP, USD]
    Cable made an early push back towards 1.5730 as the dollar weakened with stocks on the rise. However, follow through was contained by an Asian central bank reportedly protecting option barrier exposure from 1.5750. The absence of larger flows guided Cable back to 1.5710 and it is currently trading just a short distance from today's 1.5700 plain vanilla option expiries. The bias for Cable is on higher levels after last week's push higher, which should continue to encourage demand on dips. Note, that corporate hedging activity increased since Cable first climbed back over 1.5700 and the move on higher levels could be choppy. On an intra-day basis, order book bids are close to the market at 1.5670-80 and into 1.5650 and below.

    [USD, CHF]
    The CHF is still settled at slightly easier levels than we've seen of late as risk appetite ended last week on a more positive footing and this tone carried into today's session. EUR-CHF is stable ahead of 1.2300 and USD-CHF is underpinned ahead of 0.9200. Interest to run long USD-CHF positions ahead of this week's FOMC meeting and SNB policy outcome was evident last week and this should keep the dollar pairing stable. The SNB are expected to maintain the current policy stance, but there has been intense speculation in recent weeks that the Fed could begin to taper QE later this year. EUR-CHF firmed up towards 1.2325 early on, but there was a lack of momentum to carry it through offers from 1.2340-50.

    [USD, CAD]
    USD-CAD is steadier around the 1.0150 region following Friday's downturn below sell stops at 1.0145. In Asia, the pick up in risk appetite fueled selling pressure on upticks, while last Friday's fall has also shifted the short term picture to another downside test. Some bids were reestablished from 1.0135 to 1.0125 overnight and there are corporate backed orders from 1.0120 to 1.0100. Offers are noted ahead of 1.0200 currently.

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