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By XE Market Analysis November 4, 2013 6:38 am
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    XE Market Analysis: North America - Nov 04, 2013

    The dollar eased in Europe after it registered fresh trend highs in thin Asia trade. Asian participants fished for stops after last week's big move out of EUR-USD longs amid renewed talk of Fed taper and ECB rate cut speculation following weaker than expected Eurozone CPI data. However, after printing 1.3442 lows it pushed back over 1.3500 in Europe. Eurozone data included an as-expected manufacturing PMI release and Eurozone investor sentiment rose, but it did not dampen rate cut speculation. GBP was supported by a reserve manager and a robust U.K. construction PMI release. Overnight, China non-manufacturing PMI came in at 56.3 in October from 55.4 previously.

    [EUR, USD]
    EUR-USD headed back through 1.3500 amid light repositioning and after Eurozone manufacturing PMI. The number was confirmed at 51.3, which is in line with the preliminary reading, though national data remains mixed. Activity is expanding in most Eurozone countries, apart from France and Greece, but the recovery is still fragile and uneven. Eurozone Sentix investor sentiment jumped in November to 9.3 from 6.1 previously. EUR-USD traded into the 1.3515 area, where fresh supply was noted. Short term accounts are fading moves into 1.3520 initially and then into 1.3540-50 if seen.

    [USD, JPY]
    USD-JPY is consolidating ahead of the 98.50 region after offers from 98.90 capped overnight. USD-JPY largely matched last Friday 98.85 top, but option related offers put a top in place overnight. Japanese markets were close for Culture Day and volumes were low. A slightly correction in EUR-USD since late Asia has weighed a touch on USD-JPY, though underlying dollar strength and a revival in Fed taper risk has left the bias with the topside. There are still a congestion of outstanding barriers related to range binary positions that run until late November and early December, which should fuel supply on strength. These are noted from 99.00 layered into 100.00.

    [GBP, USD]
    Cable recorded session highs above 1.5960 after U.K. construction PMI rose to 59.4 in October from 58.9 in September, which were the best levels since 2007. Over the actual release Cable rallied from 1.5940 and was supported early on by demand via an Asian reserve manager following the move down to 1.5904 trend lows in Asia. These were the weakest levels since mid-October when Cable traded at 1.5895, which marked the bottom of the recent range. There is likely to be some natural demand on dips, but with Fed taper risk back on the horizon Cable will struggle to sustain higher levels.

    [USD, CHF]
    CHF maintained a mixed tone due to contrasting USD and EUR flows. A push out EUR long positions late last week left EUR-CHF over 1.2300 at the European open, but this has been offset to a degree by USD-CHF's supportive tone. During the Asian session it moved up to 0.9150 in thin trade and then edged back to 0.9115 as the dollar corrected in Europe. The CHF may see buying interest on dips against the EUR in the very near-term, with ECB rate cut expectations picking up last week. Meanwhile, USD-CHF should remain supportive in light of the revival in Fed taper risk after recent U.S. data. Buy orders are noted into 0.9100 and 0.9075-80.

    [USD, CAD]
    USD-CAD struggled to make any topside progress and probed the 1.0405 area in early Europe. Bias was turned slightly to the downside after the short term market got caught long last week after 1.0500 barriers held into expiry, while there was also heavy CAD demand related to the Barrick Gold equity offering. However, now that these factors are no longer relevant there is more potential for USD-CAD to sustain higher levels. A lot will depend on how risk assets perform though.

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