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By XE Market Analysis November 8, 2013 6:56 am
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    XE Market Analysis: North America - Nov 08, 2013

    After wild price action on Thursday there was more orderly action, with most players staying out of the market ahead today's U.S. data, which includes the delayed NFP release. EUR moved either side of 1.3400, while Cable struggled to sustain 1.6100 after the U.K. trade deficit widened. USD-JPY was stable near 98.00 after Japanese bargain hunting went through after a strong bout of deleveraging went through during Thursday's N.Y. afternoon.

    [EUR, USD]
    EUR-USD moved either side of 1.3400 as markets await today's U.S. NFP data. The EUR started defensively after S&P cut France's rating, though a healthy German trade number put a floor in place, along with light gamma trade. It traded out of 1.3385 early on and made it back to 1.3430. Further demand was limited though as bearish accounts increased short positions yesterday after the ECB rate cut and dovish comments from ECB's Draghi. There are good orders tipped into 1.3450 and more towards 1.3500, which is likely to be a near-term pivot point over today's U.S. releases. Market sentiment is skewed towards more U.S. data strength as the risk of Fed tapering policy in December hardened this week. Only a weak number would change the near-term bias. Other releases today included a weaker than expected French production, but the impact was muted.

    [USD, JPY]
    USD-JPY and the crosses found a modicum of support. Dip buying went through in Asia and similar flows were noted from the European open. The heavy move back into JPY on Thursday provided an opportunity for Japanese bargain hunting. Note, there are still growing expectations that lifers will put a lot dead money to work in overseas assets next year and JPY may have limited long-term upside. From an intra-day perspective there is unlikely to be a big commitment to put on fresh positions ahead of the NFP release. USD-JPY buyers into 98.00 were mostly corporate related. A good NFP number today could see USD-JPY retest levels over 99.00, though note very large option backed offers emerged ahead of 99.50 yesterday, while Fed taper jitters could also weigh further on risk assets.

    [GBP, USD]
    Cable struggled to maintain the 1.6100 handle and headed back to 1.6060. The U.K. trade deficit widened in September to GBP 9.8 bln, which compared with forecasts for a GBP 9.2 bln reading. This weighed on the GBP tone, though follow through in Cable should be limited into 1.6040-50 and then 1.6000-20. EUR-GBP has enjoyed a more stable tone after the plunge from 0.8400 to 0.8300 yesterday. The 0.8300 level held on corporate demand and option related flows as it represented the lowest levels since January. EUR-GBP firmed up from the 0.8320 region to 0.8360 today, though intra-day accounts are selling into strength and more offers are anticipated from 0.8380.

    [USD, CHF]
    CHF is mixed following yesterday's heavy moves. USD and EUR moves were the big drivers and unsurprisingly this had resulted in sideways action today. EUR-CHF was slammed from 1.2335 to 1.2285 on the ECB rate cut and even with a EUR-USD recovery it continues to meet sellers just over 1.2300 following the dovish policy rhetoric from Draghi. USD-CHF rallied out of 0.9120 to 0.9250 on a combination of EUR weakness and U.S. data strength, which hardened the case for Fed taper in December. A correction into the N.Y. close resulted in pullback lows at 0.9135 and it is currently stable ahead of 0.9150. After the ECB move SNB's Jordan said that the ECB rate cut creates a "complex situation" and that the SNB needs to wait to assess the impact of the move.

    [USD, CAD]
    USD-CAD traded out of the 1.0400 area after the combination of ECB rate cut and firmer U.S. GDP, though only managed 1.0463 highs. The stronger growth outcome in the U.S. is in all likelihood a CAD positive in the bigger picture, with the two economies so closely meshed. However, with risk appetite faltering, the CAD stayed down into the close. USD-CAD turned sideway overnight, as traders await the twin Canadian and U.S. employment reports later today.

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