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By XE Market Analysis June 19, 2013 6:58 am
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    XE Market Analysis: North America - Jun 19, 2013

    The dollar consolidated ahead of today's FOMC outcome, leaving a mixed tone for regional stocks. USD-JPY held on to some of its gains over 95.00, but remained sensitive to equity market chop. Domestic markets were supported after Japanese trade pointed to an improvement in economic fundamentals. EUR-USD was steady close to 1.3400 after Tuesday's breach of 1.3400 barriers, while Cable was stable ahead of 1.5600 following yesterday's downturn amid a strong EUR-GBP bid. Meanwhile, AUD-USD maintained a heavy tone and edged through yesterday's 0.9440 lows as China remained a risk and after the RBA minutes.

    [EUR, USD]
    EUR-USD maintained a holding pattern close to the 1.3400 region. EUR-JPY profit taking over 128.00 in Asia kept the upside in check and it extended towards 127.00 by early Europe. EUR-USD found support into the 1.3380-85 region amid a bullish techical backdrop and support in the other EUR crosses. EUR-CHF And EUR-GBP were underpinned ahead of 1.2300 and 0.8550, respectively, while in general the dollar trended lower ahead of the FOMC outcome on cautious optimism that Bernanke will make remarks that are aimed at reducing market volatility. It looks likely that narrower ranges will continue ahead of the Fed, but the balance of risk in the interim is on a move towards the 1.3430-50 zone.

    [USD, JPY]
    USD-JPY came back under pressure since early Europe. A more defensive tone across regional stocks fueled a reduction in speculative positions and USD-JPY ebbed under 95.00 from the 95.40 region. There were signs in Asia that USD-JPY would not sustain higher levels as Japanese corporates and short term investors took advantage of the higher levels and sold between 95.50 and 95.70, which filled in standing bids from U.S. fund names. EUR-JPY is about a big figure off Asian highs close to 127.00 and AUD-JPY is close to 90.00 after backing away from levels over 90.50. The FOMC outlook will guide directional bias ahead, with the Japanese policy stance is now having a limited impact on the market. Specs that were flushed in recent weeks are reluctant to aggressively reestablish positions.

    [GBP, USD]
    Cable headed to intra-day lows under 1.5610 versus intra-day highs of 1.5669 after the BoE minutes revealed a 6-3 vote to keep policy unchanged. Surprisingly there were further discussions related to carrying out more QE, though the costs were seen to outweigh the benefits by some members. The doves are still in the minority on the MPC and with King departing the likelihood of more QE is low. Nevertheless, GBP longs were caught a little offside and Cable looks poised to test levels through 1.5600. Note, earlier in the session an Asian investor was a decent seller at the highs.

    [USD, CHF]
    The CHF marks time ahead of the FOMC outcome and then Thursday's SNB policy review. EUR-CHF is trading a tight range ahead of 1.2300 as EUR support limited downside movement since the start of the week. Yesterday's USD-CHF fall to 0.9175 capped the EUR-CHF topside over 1.2350, but there are signs that position traders still prefer to be long of the dollar pairing on dips. The Fed are still more likely to move towards policy tapering at some point later this year, while the SNB are expected to continue with the current policy stance, which includes the lower limit in EUR-CHF at 1.2000. On an intra-day basis there is potential for USD-CHF to test last week's 0.9131 over the Fed decision. Buyers are expected all the way down to decent support between 0.9100 and 0.9075 from early February.

    [USD, CAD]
    USD-CAD maintained its firmer tone overnight, leaving it elevated above 1.0200. It extended to highs of 1.0239 in early Asia Pacific trade as AUD-CAD demand went through., though profit taking and an overhang of USD selling from Asian sovereign types capped follow through. Bias for USD-CAD should remain on the topside in the interim as uncertainty over U.S. Fed policy has weighed the CAD down this week. However, offers are seen into 1.0250 and the 1.0275-80 area. Bids should underpin ahead of 1.0200 initially.

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