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By XE Market Analysis October 16, 2013 6:04 am
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    XE Market Analysis: North America - Oct 16, 2013

    The FX majors and the commodity bloc currencies consolidated for the most part as the market waits on a potential deal from Washington D.C. There were conflicting reports, but overall the signs are positive, which has alleviated some of the pressure on speculative positions. There was no lasting impacting after Fitch placed the U.S. rating on negative watch due to political brinkmanship and reduced financing flexibility. GBP posted the biggest move on the session. Cable jumped from 1.6000 to 1.6060 on a strong U.K. employment number. The EUR did not react to Eurozone final HICP, which was confirmed at 1.1% y/y in September. The Eurozone trade surplus widened to EUR 12.3 bln from EUR 11 bln previously and exports rose 1%.

    [EUR, USD]
    EUR-USD climbed above 1.3500 late on in Tuesday's N.Y. session and extended to 1.3535 amid the Fitch rating action against the U.S. The contrasting headlines on how close D.C. is to reaching a deal led to some price chop and it backed into 1.3505-10. In Europe, there was a persistent bid on dips, which carried it just above 1.3540. Overall, ranges were still relatively narrow though and markets are still at the mercy of developments in D.C. The dollar should see kneejerk demand once a deal is reached. However, one encouraging aspect for EUR longs is the decent support into the 1.3450-60 region, which has held since the middle of September.

    [USD, JPY]
    USD-JPY maintains a holding pattern ahead of the N.Y. open. With the U.S. debt ceiling deadline looming there is no appetite to take positions in either direction. Most traders believe that U.S. politicians will not risk a debt default and recent short yen positions are still intact. USD-JPY is trading close to 98.40 after it topped out over 98.50 in Asia, but equally there was good Japanese support into 98.00. EUR-JPY met early European account demand into 133.00 and just below, leaving it at the upper end of the recent range. Positive news out of Washington D.C. could drive it back towards 133.50, where offers are layered into Monday's top just above 133.80. There are USD-JPY expiries at 98.00 today, though most of the congestion from the options market is layered from 98.60 to 99.00 and could draw on influence if the dollar can benefit on the U.S. political situation.

    [GBP, USD]
    Cable spiked on very strong U.K. employment data. The September claimant count fell 41.7k, which is the biggest drop since June 1997. The unemployment rate was unchanged at 7.7%. Cable rose from 1.6000 to 1.6030 ahead of the release in anticipation of a strong reading, and then extended to 1.6060 highs. Further gains were limited by offers ahead of October-9 highs at 1.6070 and it is marking time just ahead of 1.6000-10. The downturn in sterling is likely to be limited as a result of this release and also in light of the persistent support that has been seen ahead of 1.5900 over the last week. EUR-GBP dipped into 0.8430, though follow through was hampered by EUR-USD firmness above 1.3500 and a corporate influence from 0.8430 to 0.8400.

    [USD, CHF]
    CHF has edged higher as markets adopt a cautious tone. There were conflicting headlines overnight on where Washington is on the potential for a debt deal ahead of tomorrow's debt ceiling deadline. Equity markets are a touch softer, leaving EUR-CHF just under 1.2350 compared with yesterday's one-month highs just over 1.2375. The pullback in EUR-CHF reflects a softer USD-CHF tone and it trades around 0.9130 from 0.9180 on Tuesday. News of a deal out of Washington may result in kneejerk dollar gains. However, the fractious political backdrop leading into tomorrow's deadline may undermine scope for an extended dollar upturn. Resistance on the USD-CHF upside is noted from 0.9250 to 0.9300 and EUR-CHF has stalled around 1.2400 on previous attempts higher.

    [USD, CAD]
    USD-CAD was slightly softer near 1.0370 compared with yesterday's highs near 1.0390. The pairing followed the USD broadly higher on Tuesday, on the back of fresh hope on a debt agreement in Washington. However, momentum evaporated on conflicting headlines regarding how close Washington is to a deal. Activity remains light and prices will drift along until there are concrete signs of progress.

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