2012-11-26 20:18 (UTC)
XE Market Analysis
FX trade was quiet in N.Y. on Monday, with the market having a decidedly holiday feel to it. Ranges in the major dollar pairing were largely narrow, and aside from quick moves in the CAD and sterling when it was announced the BoC's Carney would become the next BoE governor, activity was light. The economic calendar was light as well, with just the Dallas Fed index on tap. There was little if any market impact from the softer release. Weaker risk appetite perhaps supported the greenback to a degree, as stocks gave back some of last week's gains. Tuesday's U.S. calendar picks up with durable goods, consumer confidence, and the Richmond Fed index.[EUR, USD]
EUR-USD options restricted price action ahead of the eurogroup outcome. A good size 1.2950 plain vanilla strike provided support from the N.Y. open just in front of solid bids from 1.2940-45, where an Eastern European account and French corporates were good buyers during the European morning. Movement into 1.2975 met delta hedging ahead of 1.2980-85, where defensive sellers were noted earlier ahead of widely reported 1.3000 barriers. Longs are still hanging on for a run on stops between 1.3000 to 1.3020, though a Greek debt agreement may already be in the price. In thin holiday markets EUR rallied to 1.2991 last week after it bottomed at 1.2737 last Wednesday.[USD, JPY]
The JPY firmed up in London after a modest correction across European stocks fueled an adjustment in overstretched positions. A U.S. account and a Middle Eastern name were active in EUR-JPY, which forced a move to 106.10 lows versus trends highs of 107.13 set in early Asia. The cross move fueled a USD-JPY fall to 81.93 after stops were jammed through 82.00. However, losses were limited as specs are still hanging on for yen selling pressure on upticks amid expectations of more aggressive easy policy. N.Y. trade was uninspired, with the pairing sticking inside an 82.10-20 range throughout.[GBP, USD]
Cable was heavier after earlier longs were unable to clear 1.6050 offers. European stocks have started the session on the backfoot after a subdued Asian session. Some of the moves across the FX majors on Friday were well overdone in very thin trading conditions and corrective action is on the cards. Cable ramped up from 1.5923 to 1.6051 highs and it looks poised to trade back towards support between 1.5980 and 1.5950. GBP-CAD popped to 1.5951 high vs 1.5879 low after BoC's Carney in reverse take-over of BoE as governor in credibility transfer. USD-CAD rallied to session highs over 0.9950 from 0.9935, while cable firmed over 1.6030 from near 1.6000. The market has indeed indicated its approval to Carney's ship jumping, as his tenure at the BoC has been seen as very successful through the global crisis.[USD, CHF]
USD-CHF found a modicum of support after it reached 0.9263 lows on Friday. It edged up to the 0.9300 area in Asia and has maintained tight ranges since. The technical backdrop has rolled over to the downside after it dropped sharply last week, but a more defensive market tone is expected to limit an immediate push to the downside. Natural demand should support towards 0.9240-50 ahead of an extended move to mid-October lows just in front of 0.9200, while offers noted from 0.9330 to 0.9370. EUR-CHF threatened support at 1.2035 in early trade due to the USD-CHF downturn, though the threat of SNB FX flows is limiting losses.[USD, CAD]
GBP-CAD popped to 1.5951 high vs 1.5879 low after news that the BoC's Carney would become the next BoE governor. USD-CAD rallied to session highs over 0.9950 from 0.9935, while cable firmed over 1.6030 from near 1.6000. The market indicated its approval to Carney's ship jumping, as his tenure at the BoC has been seen as very successful through the global crisis. Aside from that brief move, USD-CAD trade was light, and inside of narrow ranges.