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By XE Market Analysis November 28, 2013 6:30 am
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    XE Market Analysis: North America - Nov 28, 2013

    Movement was limited in Asia across the FX majors as order flow was kept to the minimum into today's U.S. Thanksgiving holiday. AUD posted the biggest move from 0.9080 to 0.9140 amid an unexpected rise in Australia Q3 capex by 3.6% q/q and NZD rose from 0.8120 towards 0.8180 amid a rise in business confidence from 53.2% to 60.5% in October. In Europe, there was an early EUR-USD move over 1.3600, but resistance from 1.3625-30 capped gains. Eurozone data was a mixed bag and did not really influence EUR direction. Eurozone M3 growth slumped, while inflation data in Spain rose and some German state readings also came in on the firmer side. There was also stronger than expected Eurozone economic confidence data and German unemployment rose. GBP was choppy amid two-way action in thin trade. The crosses experienced GBP selling, but Cable extended to new trend highs near 1.6350. The BoE's Financial Stability Review acknowledged the rise in house price inflation, adding that valuations were high by historical standards, but there was no evidence that it was a threat to stability currently. However, the BoE decided to shift the funding for lending scheme focus away from housing to soley on SME lending from January 2014.

    [EUR, USD]
    EUR-USD probed the topside again. European market participants digested the Eurozone data mix, which underlined the diverging views on ECB policy. Headline inflation accelerated in Spain and some German states and reinforced the view that ECB will stay on hold next month. However, a poor M3 money supply growth reading of 1.4% y/y is an argument for further measures to kick start lending. A EUR move out of 1.3570 through 1.3600 in early trade encouraged a few follow through buyers and thin conditions enabled it to push on 1.3620. There are resistance levels between 1.3625 and 1.3650 that should slow the pace of the rally, though.

    [USD, JPY]
    USD-JPY and the JPY crosses maintained firm levels following yesterday's strong rally. Light profit taking went through, which capped USD-JPY over 102.25, but the downside was supported through 102.00 from importers and fund names. USD-JPY movement on the topside could be on the slow side due to very large option barriers between 102.25 and 102.50, while there are also huge barriers from 103.00-103.25 held by a U.S. account for expiry on December-20.

    [GBP, USD]
    GBP month-end flows went through in quiet trade. After the heavy bout of macro and real money demand against several currencies yesterday the balance of GBP interest early on was on the sell-side. EUR-GBP month-end demand was noted from 0.8320 to 0.8350 and GBP-CHF corporate hedging went through from 1.4810 down to 1.4740. However, once the moves ran there course GBP remained buoyant and Cable chopped down from 1.6345 to 1.6300 early on and then back to 1.6345 trend highs. EUR-GBP fell from 0.8350 to 0.8315 and GBP-CHF retraced the move from 1.4810 to 1.4740 and held the 1.4800 level. The BoE's Financial Stability Review noted the pick up in house price inflation, but did not think it represented a threat to stability currently. However, the funding for lending scheme from January 2014 will be refocused solely on SME lending as the housing market no longer needs support.

    [USD, CHF]
    EUR-CHF recovered modestly in front of 1.2300 yesterday and headed back through 1.2330 during the N.Y. session. The move higher was a function of USD-CHF firmness, though follow through was limited overnight due to the U.S. holiday. Movement in EUR-CHF should remain limited in our opinion as EUR-USD gains stalled out. 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 found good buyers on Wednesday, resulting in a move from near 1.0530 to highs of 1.0602. Not much on the Canadian calendar, though the heavy U.S. slate had some influence. Defense of barrier options at 1.0600 was reported, though the pairing touched 1.0600 before edging slightly lower. Stops are said to be large at 1.0610, just over the trend high seen four months ago. Over 1.0610, the next target will be 1.0657, the high posted on October 4, 2011.

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