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By XE Market Analysis January 3, 2014 1:30 pm
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    XE Market Analysis: Asia - Jan 03, 2014

    FX trade was fairly subdued in N.Y. on Friday, with many traders still on holiday. There was no data to drive prices, though the dollar was a bit higher to unchanged versus major currencies. EUR-USD edged into one-month lows of 1.3600, though found good support into the figure. USD-JPY meanwhile, found buyers over 104.25, and managed to rally to near 104.60. Cable reclaimed the 1.6400 handle after dipping briefly under the level, while USD-CAD was steady over 1.0600. The CAD has remained firm despite the sharp oil price sell-off seen this week. Trading desks should be back to full staff next week, with the holiday period officially over. As a result, we may get a clearer picture of where the dollar may be headed. We look for the greenback to move somewhat higher over the next few weeks, as the U.S. economy improves, and as the Fed gets on with its taper program.

    [EUR, USD]
    EUR-USD posted a nearly one-month low of 1.3623 early on, eventually taking out the December 6 low of 1.3619. The pairing later snuck up on the 1.3600 level, putting in a floor of 1.3601. European bidding was noted into the lows, while earlier noted Asian interest dried up. Stops should be a factor on a move under the figure, with more buyers reportedly parked at 1.3580-50.

    [USD, JPY]
    USD-JPY stabilized in N.Y. dealings, finding support into 104.25 before rallying to highs near 104.60. Risk aversion saw the pairing fall to 104.07 in Asia, as equity markets there fell for the second day. With the risk backdrop more stable though the N.Y. session however, cooler heads allowed the yen to ease back some. Next week will be a key test for the JPY, as the new year kicks off in earnest, and as Japan returns to the office after nearly a week off.

    [GBP, USD]
    Sterling has corrected lower amid rebounds in both the dollar and yen. Until recently the pound was being supported by differentials, with U.K. yields rising quicker than other G7 yields following a run of impressive U.K. data. Yesterday's unexpected dip in the manufacturing PMI provided a speed bump, though it doesn't change the overall positive outlook for the U.K. economy. Cable traded briefly under 1.6400 in N.Y. on Friday, though ended the session comfortably over the figure, Next week will be of interest, as the market returns to full force, and we get a better feel for whether or not current levels are a buy, or will prompt further stop loss selling.

    [USD, CHF]
    EUR-CHF firmed up to start the year, taking out 1.2300 ahead of the N.Y. open. The CHF's gains in December had reflected an unwinding in the Swiss currency's safe haven premium as the period of Fed policy uncertainty ended with its decision to start QE tapering. We look for the cross to stabilize at levels above the SNB's worry zone, though with the dollar looking better overall, the CHF may lose some ground to the greenback.

    [USD, CAD]
    USD-CAD traded into the 1.0600 level in early North American trade, though while it found support ahead of the figure, upside was limited, despite the dodgy risk backdrop, and weaker still oil prices. Gains were capped at 1.0630, and looking ahead to next week, we look for further USD-CAD downside potential. Key data is due from both sides of the border next week, which could firm up economic sentiment, to the aid of the CAD.

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