2012-11-27 07:31 (UTC)
XE Market Analysis
Risk appetite was boosted after yesterday's N.Y. close after an aid deal on Greece was agreed. The dollar traded on the easier side, though EUR movement over 1.3000 was extremely brief, which raised expectations that a top may be forming. Sentiment was also helped by news that China industrial profits gained for the first time in nine months in October, although this did not stop the SSEC from underperforming amid concerns over the earnings outlook. Japanese LDP leader Abe continued to talk tough on JPY, which put a cap on further gains following yesterday's corrective action. Month end restricted activity and negotiations on the U.S. fiscal cliff are also ongoing.[EUR, USD]
EUR-USD was choppy as news emerged over a deal on Greece. It made two attempts over 1.3000 when the news broke, but experienced a heavy congestion of offers at 1.3010, which fueled a move back towards the 1.2980 area. There are expectations that EUR may be forming a temporary top, along with conjecture that U.S. fund book closing could favour the dollar towards the end of the week. In the near-term, offers are layered to 1.3050, while on the downside support is noted from 1.2940 and towards 1.2900, which are protecting larger stops, though around 1.2930-40 two way order flows is anticipated from short term accounts.[USD, JPY]
USD-JPY traded defensively for a large part of the session following Monday's correction, which eventually cleared away some stops through 81.90. There was virtually no follow through though as specs are still hanging on for more yen selling pressure amid expectations of more aggressive BoJ policy ahead. LDP leader Abe reiterated his position on BoJ indepedence and policy, which fueled a bout of yen selling in late Asia and lifted USD-JPY out of 82.00 back to 82.30, but option related offers are now heavy from the 82.65-70 area ahead of long standing 83.00 barriers.[GBP, USD]
Cable is on the front foot in line with EUR firmness, yet also as market participants in London digest news that BoC Governor Carney will take over from current BoE Governor King next June. Carney's safe stewardship of Canadian banks is a positive for U.K. banking, which has experienced one controversy after another since the financial crisis started in 2008. Other sterling positive includes news that Chinese authorities gave the greenlight to insurance companies to invest directly in oversea assets, which is expected to benefit the London real estate market. Cable longs eye the 55-dma at 1.6065 and a break above 1.6100, while the 1.5980-00 area should now provide near-term support.[USD, CHF]
USD-CHF found a modicum of support on dips. Natural demand emerged into 0.9250 in early Asian trading. The technical backdrop had rolled over to the downside after it dropped sharply last week, but EUR is struggling to sustain higher levels and there are expectations of dollar inflows into month end. The dollar pairing could make back between offers at 0.9300 and 0.9330 on corrective action, though selling pressure is widely expected to increase towards the mid-0.93s. EUR-CHF moved briefly over 1.2050 in early trade after the agreement on Greek aid, but ran into selling pressure on upticks, leaving it little changed just in front of 1.2040.[USD, CAD]
USD-CAD headed back to 0.9915 after short term accounts faded yesterday's rally over 0.9960. News of BoC Carney's departure from the BoC next June weighed a touch on CAD$, but the broader risk backdrop was the more telling influence. News that a deal for Greece had been reached was a positive for risk, which boosted stocks, commodities and in turn CAD$, leaving the dollar pairing close to natural order flow at 0.9900-10. However, into Friday's Canadian GDP release and next week's BoC meeting further CAD$ strength may start to wane. Buyers are tipped at 0.9885 and 0.9875. Offers remain from 0.9980 to 1.0000.