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By XE Market Analysis September 2, 2013 6:52 am
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    XE Market Analysis: North America - Sep 02, 2013

    Sentiment was positive as the immediate risk of a U.S.-led military strike against Syria faded, while economic data was also positive. U.S. President Obama decided to put the Syrian issue to vote in Congress when it reconvenes on September 9th. Economic data releases were mostly from the manufacturing sector today and included a healthy gain in China, Eurozone and the U.K. In Asia, Japan's Q2 capex was unchanged y/y after the 3.9% drop in Q1 and Australia building approvals surged 10.8% m/m, which was more than double market expectations. South Korean exports for August also grew 7.7% y/y and compared with a 3.8% y/y median. Appetite to reduce dollar longs was limited due to the U.S. holiday and ahead of key event risk and data later on in the week. Only specific currencies saw good flows. AUD benefited on China, GBP gained on more U.K. data, but USD-JPY broke higher over 99.00 and USD-CHF also held firm above 0.9300.

    [EUR, USD]
    EUR-USD is hovering ahead of 1.3200 in quiet trade. Today's U.S. holiday and pending event risk/data later on in the week has sapped market momentum. An upward revision in Eurozone manufacturing PMI lifted the EUR just above Asian session highs around 1.3225, leaving it adrift of near-term resistance around 1.3250. Working against the EUR-USD topside is the downturn in EUR-GBP and EUR-AUD. The former benefited on the strong domestic release, while the latter saw good domestic numbers overnight and China data also helped. There are option strikes between 1.3200 and 1.3250 that could attract into the European afternoon given the absence of U.S. traders.

    [USD, JPY]
    USD-JPY posted the biggest footprint in Europe as specs tripped stops in early trade. A move through the bottom of the Ichimoku cloud at 98.75 was the catalyst Japan bank demand for USD to cover customer buy stops. Once 99.00 gave way model funds and momentum accounts forced a move through exporter offers to 99.10 and daily highs from August-5 and August-23 at 98.15. In the process the Ichimoku cloud top was cleared away at 99.20 and it extended to the 99.30 region. USD-JPY has not traded on 100.00 since it topped out at 99.95 on August-2 and the last time it trade above that level was late July. Positioning over the week will be dependent on how the risk backdrop unfolds and whether U.S. data firms up into Friday's NFP release.

    [GBP, USD]
    Cable benefited from a rise in risk appetite in Asia, which boosted demand for GBP-JPY. News that Verizon and Vodafone finally reached an agreement for GBP 130 bln may lead to supportive GBP demand, although it is widely thought that any flows that were needed to cover the widely reported deal have probably gone through now. Negotiations have been on-going for many months. Nevertheless, Cable does look as if it has found a short term base near the 1.5500 region and with U.K. fundamentals improving there is likely to be more long-term demand for GBP on dips.

    [USD, CHF]
    EUR-CHF edged out a modest rally, led by a pick up in risk appetite. The immediate risk of military action against Syria faded further as U.S. President Obama also decided to put the issue to vote in Congress, which will reconvene on the September 9th. Aiding the better tone was encouraging manufacturing PMI data from China. EUR-CHF firmed up from 1.2310 and moved just over 1.2330. Upward momentum may run out of steam from here due to a build up of offers between 1.2330 and 1.2350. Swiss manufacturing PMI slowed to 54.6 from 54.4, which was weaker than expected, but should not have a large impact on price action. Elsewhere, SNB's Jordan said that the CHF cap is still important as sudden strengthening cannot be ruled out in the current environment. Jordan said that expansive policy was still justified and expected Swiss inflation to remain low in the coming years. However, he said that SNB had the option of draining liquidity in the case of any inflation risk.

    [USD, CAD]
    USD-CAD edged higher. The dollar is still trading on the firmer side for the most part, which has enabled USD-CAD to maintain the 1.05 handle. It traded just above 1.0540 in Asia and a subsequent pullback to the 1.0520 area by early Europe met a round of buying interest. From a technical perspective there is still scope for a sustained move on higher levels, though very good offers are still noted into the 1.0570 area related to outstanding option structures.

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