Home > XE Currency Blog > XE Market Analysis: North America - Sep 20, 2013


XE Currency Blog

Topics7781 Posts7826
By XE Market Analysis September 20, 2013 5:32 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5705
    XE Market Analysis: North America - Sep 20, 2013

    The FX market was quiet as consolidation set in after the heavy volumes seen over the course of the week. The dollar and yen consolidated softer levels, although both currencies made up a little bit of ground from Thursday's base as profit taking set in. It was a similar story across equity and commodity markets as risk assets faded from the highs. There were no fresh developments and this saw the EUR drift into 1.3500 and Cable edged into 1.6020. USD-JPY was supportive around 99.30, but remained short of yesterday's peak over 99.60. BoJ Governor Kuroda reiterated the easy policy bias overnight when he maintained that the BoJ would continue with QE for as long as needed in order to achieve the 2% inflation target and hoped to offset the upward pressure on JGB yields. In Europe, economic data included a slight improvement in U.K. public finance data.

    [EUR, USD]
    EUR-USD held above the 1.3500 level. Ranges were very narrow though following yesterday's move up to trend highs of 1.3568. In N.Y. it ran into selling pressure near 1.3560 and edged out 1.3510 lows. There was very good support around those levels and more strong bids are seen at 1.3510, into 1.3470 and 1.3450-60. The bias for EUR remains with higher levels and after Fed sidestepped QE it may have left the opportunity for a successful run on 2013 highs just over 1.3700. We suspect that this is the target that several large players are looking for.

    [USD, JPY]
    JPY is moving within a narrow range as activity drops off into the weekend. Overnight, fixing flows lifted USD-JPY just above 99.50, but thereafter Japanese accounts were net sellers. The short term technical backdrop has kept it underpinned from 99.20-25 and further support is likely across 99.00 as the majority of market participants look for a move back on 100.00 and above. Option expiries that support this view today include large maturities at 99.75 and 100.00. The crosses are still holding up, though appetite to add further to yesterday's long positions remains low. Today looks like a session of consolidation. Looking ahead, Fed policy inaction should keep sentiment positive for a time, though potential risks include a revival in Fed taper expectations if data continues to rise, U.S debt ceiling wrangling and limited upside in emerging markets.

    [GBP, USD]
    Cable has consolidated gains. It is still holding at relatively firm levels compared with Monday's 1.5900-50 trading zone. There is strong support noted from 1.6020 to 1.6000, where short term accounts, macro names and real money are looking to buy. GBP corrected from post-Fed highs as U.K. retail sales weakness triggered profit taking, but GBP bulls are taking advantage of cheaper levels. EUR-GBP is at levels where corporate hedging has picked up sharply, though supply related to EU subsidies is expected offset. After the Fed outcome and the September BoE minutes Cable longs are positioned for a move on 2013 highs over 1.6300, but EUR-GBP may begin to move in a sideways trading pattern.

    [USD, CHF]
    The CHF has been mostly firmer since the Fed policy decision. USD-CHF is marking time close to 0.9100, which is very close to yesterday's 0.9090 trend lows, and EUR-CHF trades around 1.2325 versus yesterday's N.Y. lows at 1.2310. The upturn in the CHF was pinned on massive CHF-JPY demand as Japanese accounts piled into leverage positions. The cross surged to multi-year highs of 109.41 and maintains a firm tone near 109.00. This left a bearish overhang on the EUR-CHF daily chart and further CHF-JPY flows could pressurise the 1.2300 area. while USD-CHF is still looking vulnerable after it broke 0.9100 on Thursday.

    [USD, CAD]
    USD-CAD is on the front foot after it rebounded out of three-months near 1.0180 on Thursday. After basing at 1.0180 it moved higher on solid corporate demand and real money hedging activity. The pairing made its way steadily higher, eventually peaking over 1.0260 on Thursday, and then extended through 1.0285 today. Risk taking levels eased back from Wednesday's post-Fed spike, which may have weighed on the CAD some. USD-CAD should run into natural supply into 1.0300. Buyers are seen into 1.0235-40 and 1.0220 to 1.0200 on an intra-day basis.

    Paste link in email or IM