2012-12-05 07:13 (UTC)
XE Market Analysis
Risk appetite was boosted after a 3% surge on China's SSEC, which weighed on USD and JPY. Technical watchers had flagged a rebound late last night amid bear exhaustion, though funds piled back into stocks in earnest on high volumes amid hopes that policy makers will unveil measures to boost the economy at next week's meeting to determine policies for the coming year. BoJ's Nishimura reiterated that it will continue to pursue powerful easing, adding that asset purchases could continue past the 2013 deadline if needed. Asian data included China HSBC services PMI, which hit a three-month low of 52.1 from 53.5, previously. Australia Q3 GDP came in at 0.5% q/q sa versus 0.6% in Q2, which was in line with expectations.[EUR, USD]
EUR-USD headed back over 1.3100 amid speculative dollar selling pressure, along with ongoing FX reserve diversification. Heavy EUR-JPY demand was also a bullish lead, although it did not trade higher than 1.3125 due to the influence of large order congestion and outstanding 1.3150 barriers, which are linked to a range binary position. Offers are noted to 1.3140-50 and more are tipped at 1.3175, though stops are likely to be mixed in between those levels. We expect buyers to remain in control amid interest layered from 1.3075-80 to 1.3020.[USD, JPY]
USD-JPY and the JPY crosses saw heavy demand on improved in risk appetite and ongoing evidence that the BoJ is opening to pursuing more aggressive policy. Short term accounts were caught offside yesterday in anticipation of a downside test in USD-JPY, which exacerbated the Asian move up from 81.80 to 82.35, though upside momentum from here should slow given the proximity of exporter offers from 82.50 and residual option related flows underneath 83.00, where some long-term barriers rolled off on Tuesday. EUR-JPY was buoyant and rallied from 107.15 to 107.96 highs, where option related sellers put a top in place. AUD-JPY traded back to 86.25 from 85.70 and GBP-JPY was boosted from 131.70 to 132.60.[GBP, USD]
Cable continued to trade on the front foot amid a rise in risk appetite, leaving it close to 1.6100. However, ahead of today's Autumn Statement from the U.K. Chancellor interest is likely to be restrained. Upside movement has also met hedging activity around 1.6125-30 and oustanding option barriers at 1.6150. On the downside, bids should support from 1.6070-80 and ahead of 1.6050.[USD, CHF]
EUR-CHF remains supported close to 1.2150 following the decision by large Swiss banks to charge negative rates on CHF depos. Speculative names have unwound swissy longs in anticipation that capital inflows will drop off, though the improved tone in the eurozone has also added traction. Eurozone bond markets are in much better shape and this has helped to shore up the EUR downside over the last week. USD-CHF has also been stable despite last week's bearish break lower. After moving into 0.9250 it reached levels, where buyers saw good risk-reward and demand is layered to 0.9230 and into 0.9200-10.[USD, CAD]
USD-CAD is trading over support at 0.9900-10 after BoC left rates unchanged at 1% as expected, and maintained its modified tightening bias on Tuesday. The overnight rally in Asian stocks encouraged selling pressure from 0.9935 after it stalled over 0.9950 yesterday. Given the gains in other currencies against the USD over the last few sessions, CAD$, may play catch up in due course. The downside is well supported by a variety of option and corporate backed bids, but a clean break of 0.9900-0.9895 could unlock support around November-7 lows at 0.9875-80.