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By XE Market Analysis November 8, 2013 2:46 am
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    XE Market Analysis: Europe - Nov 08, 2013

    After wild price action on Thursday Asian markets experienced more orderly action. Some of the price swings yesterday were heavily influenced by positioning. USD-JPY did a 180 pip round from 98.70 up to 99.40 down to 97.60 before it steadied. In Asia, there were heavy buyers on dips, but broad equity market losses weighed as the JPY crosses were underpinned by further deleveraging after yesterday's U.S. data strengthened fuelled Fed taper jitters. EUR-USD met selling pressure on strength following the plunge from 1.3500 to 1.3295 and subsequent rebound to 1.3450, leaving it near 1.3400. AUD-USD marked time under 0.9500 after it also fell from 0.9510 to 0.9430 by early Asia. The RBA left the door open for further rate cuts if needed when it released the Monetary Policy Statement today. It trimmed up its growth forecast and also talked down the currency again. Over the European morning movement may slow up as the focus turns to the U.S. NFP release. After recent U.S. data strength it will define the dollar outlook in the coming weeks.

    [EUR, USD]
    EUR-USD had a very quiet session in Asia after the massive price swings on Thursday. After the EUR rebounded out of 1.3295 post-ECB lows it squeezed as high as 1.3450, which provided an opportunity for macro fund selling and fresh shorts from positional traders. It drifted from 1.3420 to 1.3390 in Asian trade, but there was a lack of interest to push the pair aggressively following yesterday's moves and ahead of key U.S. data. The surprise ECB rate cut and the dovish rhetoric that accompanied the move should leave EUR on the heavier side, particularly with Fed taper jitters also on the rise. However, it is widely reported that Asia accounts are looking to buy the EUR on dips and there may be limitations to where EUR can realistically go to ahead of the weekend.

    [USD, JPY]
    USD-JPY and the JPY crosses found a modicum of support in early Asia following yesterday's massive flight back into JPY, which followed the ECB rate cut and a downturn in risk assets as Fed taper risk rose a notch after more U.S. data strength. USD-JPY was supported around the 98.00 region in early trade after it closed out the N.Y. session above 98.00. The upside was limited to 98.25 over the Tokyo session and the JPY crosses were still struggling due to broad equity market losses. EUR-JPY, which was major casualty and significant influence on Thursday, traded near 131.80 early on and then moved back to 131.30, leaving it just a short distance from Thursday 131.22 base. It fell from highs of 133.40 over the ECB decision.

    [GBP, USD]
    Cable moved in tandem with EUR-USD over the last 24 hours. It hit intra-day lows at 1.6010 on Thursday amid the EUR plunge after the ECB unexpectedly cut rates by 25 bps and backed it up very dovish rhetoric. However, after it reached intra-day lows there was a significant short squeeze and Cable reversed back to the 1.6100 region.. Meanwhile, EUR-GBP plunged to 0.8300 from 0.8400 on the surprise ECB rate cut. The last time EUR-GBP was trading at these levels was in January and light corporate support and option related flows could go through here.

    [USD, CHF]
    USD-CHF zoomed up to 0.9250 after the ECB rate cut, and stronger U.S. GDP data. EUR-CHF meanwhile, dove from near 1.2340 to 1.2285 lows. While verbal ECB assurance of an easing bias failed to convince markets that the ECB has turned more dovish than the Fed, Thursday's move clearly proved otherwise and that may help to keep a lid on the EUR, much to the SNB's chagrin.

    [USD, CAD]
    USD-CAD traded out of the 1.0400 area after the combination of ECB rate cut and firmer U.S. GDP, though only managed 1.0463 highs. The stronger growth outcome in the U.S. is in all likelihood a CAD positive in the bigger picture, with the two economies so closely meshed. However, with risk appetite faltering, the CAD stayed down into the close. USD-CAD turned sideway overnight, as traders await the twin Canadian and U.S. employment reports later today.

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