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By XE Market Analysis September 13, 2013 6:25 am
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    XE Market Analysis: North America - Sep 13, 2013

    The dollar recovered some of Thursday's lost ground. Dollar demand accelerated in late Asia as market participants responded to a Nikkei report that suggested Larry Summers will be named as the next Fed Chairman late next week. However, it was a fairly subdued Asia and European session and option expiries attracted for the third consecutive session. The well flagged magnet strikes in Cable at 1.5800 kept ranges tight. EUR found support into 1.3260 and edged back near 1.3300 and USD-JPY topped out just ahead of 100.00. Economic data highlights included an upward revision in Japan industrial output to 3.4% from 3.2% previously. U.K. construction output rose 2.2% m/m in July and Eurozone Q2 unemployment fell 0.1% q/q. There was also a downward revision in Sweden Q2 GDP to -0.2% q/q and just 0.1% y/y from a 0.6% preliminary reading.

    [EUR, USD]
    EUR-USD maintained the recent trading pattern. An early move into interim support ahead of 1.3250 met buyers and it held a tight range near 1.3300. Overall, EUR gains have been constructive over the course of the week after it held 1.3100 last week. Failure to take out barriers saw a reduction of excessive EUR shorts and this has guided prices higher. Resistance at 1.3330 has been an effective cap and option congestion dominated for the last two sessions as volumes drop ahead of the FOMC outcome. Specs may be tempted to make another push higher ahead of the weekend. However, U.S. markets could react to the Nikkei scoop, which suggested that Summers could be named as Fed Chairman next week. Markets think he is more likely to accelerate policy tapering and may underpin the dollar. Summers has said in the past that QE is not an effective way to boost the economy.

    [USD, JPY]
    USD-JPY turned sideways just ahead of 99.50 after a failed attempt to clear 100.00 in Asia. All of the USD-JPY action came in the Asia afternoon as dollar buyers picked up into the Tokyo fix. It moved up from 99.50 to 99.80, then accelerated on pre-weekend position adjustment and a rise in U.S. yields. Exporters forced a move back to 99.60, where it has settled in Europe. There are a lot of option expiries to digest again, with 99.50, 99.80 and 100.00 maturities closest to current market levels, which are limiting interest ahead of the N.Y. open.

    [GBP, USD]
    Cable barely moved as well flagged magnet expiries at 1.5800 reduced activity. Dollar gains in late Asia forced a move into 1.5775-80, but bids between 1.5780 and 1.5760 underpinned for the third session and helped Cable back over 1.5800. Long gamma positions between 1.5800 expiries and barriers from 1.5850 should see persistent supply on upticks. There are larger than average orders and barriers run all the way up to 1.6000. The underlying trend could turn more consolidative if Cable corrected back below 1.5750, which was a major resistance level on the way up. For the second consecutive session EUR-GBP expiries are also confirmed at 0.8400 and it has been uneventful close to the 'figure' as a result. GBP did not respond to U.K. construction output, which rose 2.2% m/m in July.

    [USD, CHF]
    The CHF is mixed in quiet trade. EUR-CHF is marking time close to 1.2375, which is the middle of the range from the last 24 hours or so. A USD-CHF rebound out of 0.9270 to 0.9340 ran out of steam as offers from model funds put a top in place after the European open. EUR-CHF movement is laboured as risk taking is looking more subdued as market participants have pared back exposure ahead of next week's key event risk. The Fed will dominate headlines, though Syria is still an issue and there is also the SNB to consider and now a potential announcement for the next Fed Chairman. EUR-CHF found interim support at 1.2350 on Thursday, which should prop up intra-day. The EUR-CHF downside was absorbed to a degree by USD-CHF support, but both the cross and the dollar pairing could struggle as recent swissy shorts are pared back.

    [USD, CAD]
    USD-CAD maintained a very narrow trading band after it found support into 1.0310 on Thursday. Options are set to dominate into the weekend. Barrier options were reported at 1.0300, and were defended on dips toward 1.0310 on Thursday. In today's session USD-CAD expiries at 1.0335 are standing out on the expiry diary, with up to $1 bln worth of maturities. Softer risk taking levels, and the recent selloff in gold and silver has also provided some support to the pairing. There is price congestion into 1.0350, which could encourage offers, while better orders lie towards 1.0370.

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