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By XE Market Analysis November 27, 2013 6:19 am
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    XE Market Analysis: North America - Nov 27, 2013

    FX markets were thin ahead of tomorrow's U.S. Thanksgiving holiday and month-end. The dollar was weighed by positive leads from Europe, though USD-JPY was the exception due to cross-flows. EUR-USD broke 1.3600 after German Chancellor Merkel reached a coalition deal, along with a rise in German consumer confidence data. Cable posted a strong rally from 1.6210 through 1.6300 after U.K. Q3 GDP met expectations. USD-JPY was boosted by persistent demand on dips and strength in EUR-JPY and GBP-JPY, leaving it within reach of 102.00 barriers. AUD-USD found a modicum of support ahead of 0.9100 as the market welcomed news that the PBoC plans to introduce a deposit insurance system and China will also lift certain foreign investment restrictions.

    [EUR, USD]
    EUR-USD was supported on dips after yesterday's positive close. A bullish technical backdrop encouraged early buyers in Asia, while markets reacted positively on news of the German coalition deal. It failed to break 1.3600 in Asia due to commercial offers, but in Europe a better than expected German consumer confidence reading triggered a run on stops over 1.3600 and it hit 1.3613 highs before fresh sell-interest moved in. Overall, it managed to consolidate gains and looked comfortable close to 1.3600 ahead of the N.Y. open, which bodes well for further topside moves.

    [USD, JPY]
    USD-JPY moved back into the 101.85 region amid further yen selling pressure via several currencies since the Asia afternoon session. Expiry risk for USD-JPY is still noted between 101.00 and 102.00 in the coming sessions. There are moderate size maturities at 101.50, though risk is for a move through 102.00 barriers as volumes thin out into the U.S. Thanksgiving holiday. Tension in the East China Sea picked up since China established its new air defense zone, which may be a negative for sentiment. If the situation deteriorates then leverage positions via USD-JPY and the JPY crosses may come under pressure.

    [GBP, USD]
    GBP recorded healthy gains as U.K. Q3 GDP met expectations at 0.8% q/q and 1.5% y/y. Into the U.K. data Cable dipped from 1.6235 to 1.6210 and from there a large buy order by a leading U.S. name went through and long-term resistance at 1.6250-60 was taken out, leaving it at the highest levels since January-2. Option related selling was evident into 1.6300, though corrective action was extremely shallow throughout, which suggests more upside momentum.

    [USD, CHF]
    EUR-CHF is heavy just in front of 1.2300 as a USD-CHF fall into 0.9050 weighs. Movement in EUR-CHF should remain limited in our opinion as EUR-USD eyes a sustained run higher. There is also good support under 1.2300 from local names that are buying ahead of 1.2280, which has held since early October. The SNB have also reiterated its policy stance on any downside threat over the last few months and earlier in the week it warned that it was willing to defend the franc cap in unlimited amounts and also consider other policy options if needed.

    [USD, CAD]
    USD-CAD rallied out of 1.0520 on its way to highs of 1.0558 on Tuesday, where it was said to have run into a band of offers up to 1.0570. Barrier options remain in place at 1.0600, and will likely be defended into today's reported expiry. In the meantime, range trade looks set to continue, with corporate bids seen from 1.0520 to 1.0500.

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