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By XE Market Analysis September 6, 2013 7:00 am
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    XE Market Analysis: North America - Sep 06, 2013

    The dollar held on to the large majority of Thursday's gains as market participants turned their attention to today's U.S. NFP data. Thursday's U.S. releases reinforced expectations that the Fed on are track to taper policy later this month, which saw 10-year Treasuries move through the 3% threshold. The underlying dollar bid left EUR just a short distance from 1.3100 option barriers, while USD-JPY consolidated around 99.70 after it corrected from 100.24 highs in Asia. Light GBP profit taking went through after the U.K. trade deficit widened and industrial production was slightly weaker than expected. German industrial production came in on the weaker side and reinforced EUR selling pressure, though price action was very slow due to 1.3100 barriers. Swiss CPI was flat y/y and had no impact as EUR-CHF consolidated close to three-week highs around 1.2400.

    [EUR, USD]
    EUR-USD continued to find a modicum of support on dips. Outstanding option barriers at 1.3100 and light position adjustment boosted the pair back to the 1.3140 area during the Asia session. In Europe, it traded a very narrow range under 1.3120. Yesterday's break below long-term support and the close under 1.3150 should encourage selling pressure on upticks. Better sellers are still more likely into 1.3200 and above though, but the EUR outlook in the near-term will be solely dependent on today's key U.S. release. This will set the tone into the middle of the month when the Fed policy decision is due. On Thursday ECB's Draghi reiterated his dovish stance, but failed to keep market rates down.

    [USD, JPY]
    USD-JPY pulled back from the 100 level on dollar profit taking. It hit lows around 99.50 and compares with intra-day highs of 100.24. Japanese bids into 99.50 are protecting trailing stops a little lower down and these could be vulnerable on more pre-NFP position reduction. Adding weight on the USD-JPY tone overnight were reports that Tokyo may not get the Olympics after all. The announcement is due on Saturday and Japanese stocks that stand to benefit on any positive announcement came under pressure and forced the Nikkei down from early gains of 2% to end the session 0.87% lower. Any dollar correction may be seen as buying opportunity with funds looking for extended gains based on the U.S. and Japan policy outlook. In recent sessions a build of bids were reported into 99.30, 99.00-10 and 98.70-80.

    [GBP, USD]
    GBP profit taking went through over the U.K. data releases. The U.K. trade deficit widened and the details of the release revealed an eye catching drop in exports to non-EU countries. It fell 15.8% m/m and was the largest fall since January 2009. Industrial and manufacturing production data came in slightly below expectations. Cable dipped from the 1.5600 level and moved into 1.5575 and EUR-GBP short covering went through. Very strong support came in ahead of option barrier exposure from 0.8400, while some of the activity was thought to be related to good size strikes at 0.8425 and 0.8440 for today's N.Y. cut.

    [USD, CHF]
    EUR-CHF is consolidating close to three-week highs. In Asia it edged up to a 1.2401 peak as underlying dollar strength kept USD-CHF and EUR-CHF elevated. Light profit taking in Europe saw a small move back to 1.2380, but bias is still with higher levels after the solid run higher this week. The shift in the CHF came on a plethora of factors. SNB have reiterated the current policy stance, including the CHF cap in the face of better economic data. The risk backdrop has also stabilised on the reduced threat of a wider military conflict in Syria and the rout in emerging markets has eased. The Swiss data highlight today was a flat CPI reading. In the very short term dollar flows should guide direction. There is USD-CHF resistance from 0.9470 and ahead of 0.9500 option barriers. EUR-CHF buy stops are noted behind 1.2415-20 resistance.

    [USD, CAD]
    USD-CAD trended lower as offers just over 1.0500 put a top in place in Asia. In spite of dollar firmness elsewhere bias remained with the downside and bids at 1.0470 gave way after the European open. Light stops triggered a flurry of activity and it extended through 1.0460. Corporate backed bids from 1.0450 may support the downside for a time and there are large bids anticipated from 1.0440. The twin U.S/Canada employment reports are due during the North American morning session and this will guide action ahead. Note, there are option expiries at 1.0500 and 1.0520 that could feature if CAD$ resumes the recent downtrend after today's data releases.

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