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By XE Market Analysis June 18, 2013 6:46 am
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    XE Market Analysis: North America - Jun 18, 2013

    There were mixed flows during the European morning. EUR-USD threatened 1.3400 as a rise in risk appetite boosted EUR-JPY, while EUR-AUD saw more hedge fund demand. Cable was capped over 1.5700 despite a pick up in U.K. CPI as M&A related demand went through EUR-GBP, which boosted it from 0.8500 over 0.8550. The CHF strengthened against the USD and the EUR after the Swiss lower house refused to debate a bill on a U.S. tax settlement and it will now go back to the upper house. Meanwhile, USD-JPY regained a foothold over 95.00 after the G8 backed the Japanese policy stance and on good EUR-JPY demand.

    [EUR, USD]
    EUR-USD found a base at 1.3330 in early Europe and headed back towards the 1.3400 region. Real money accounts were noted on the way up and there is still appetite to run long positions amid a positive techical backdrop. German ZEW came in on the stronger side at 38.5, which carried the EUR to 1.3498 highs, where option related offers capped. However, there is increasing risk that EUR will trigger stops higher up. Early on in the session, ECB's Draghi maintained his opened to more non-standard policy measures if circumstances warranted, but it did not deviate from his previous stance and only had a limited impact on the underlying tone. We anticipate ongoing dip demand, with buyers seen between 1.3350 and 1.3330.

    [USD, JPY]
    USD-JPY filled in good offers over 95.00 as an improvement in risk appetite after the European open weighed on the yen tone. USD-JPY rallied out of the 94.80 area and squeezed up through 95.00 amid strong EUR-JPY demand. The pick up in the cross from 126.50 to the 127.70 area carried USD-JPY through offers at 95.00-10 and 95.30. During yesterday's G8 meeting Japan got backing for its current policy stance, which is also mildy supportive, though it has not had a significant impact like previous meetings. The recent shakeout in speculative positioning has left a more cautious tone and there is also the FOMC outcome to contend with on Wednesday.

    [GBP, USD]
    Cable was unable to sustain higher levels as GBP selling went through via the cross. Cable headed briefly over 1.5700 after U.K. CPI picked up to 2.7% in May, which was a notch faster than expected and compared with the 2.4% reading in April. However, movement over 1.5700 was stymied by option related offers related to expiries at 1.5700 and 1.5730 today and it headed below 1.5650. EUR-GBP rallied out 0.8500 to trade back into 0.8550 on real money demand and speculation of flows related to M&A. Strike interest at 0.8500 and 0.8550 reportedly went through related to the potential Vodafone Kabel Deutschland deal. Adding to the GBP downturn was GBP-CHF supply after the Swiss lower house refused to debate a draft law to settle the tax dispute with the U.S. The bill will now go back to the upper house.

    [USD, CHF]
    The CHF traded at firmer levels overall. USD-CHF fell back from 0.9260 and traded into the 0.9175 region on underlying dollar selling. EUR-CHF rallied out of 1.2325 towards the 1.2360 area in early trade, but was unable to sustain higher levels. USD-CHF heaviness weighed, while EUR-CHF came under pressure after the Swiss lower house refused to debate a draft law to settle a tax dispute with the U.S. and the bill will now go back to the upper house. It traded just under 1.2300, though should find support on dips as local names look towards the SNB policy decision later this week. It is expected to maintain the current policy stance.

    [USD, CAD]
    USD-CAD is moving comfortably to range. After the recent test on either side of the market movement has narrowed within the familiar trading range. USD-CAD tested levels under 1.0150 late last week, but found buyers from 1.0150 yesterday and headed back over 1.0200 on Fed policy speculation. Prices have since eased though, with an Asian sovereign noted on top and markets generally in a holding pattern ahead of the FOMC outcome. We suspect the Fed will maintain the status quo on policy and broader market sentiment will no doubt drive price action in the latter part of the week.

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