2012-12-21 19:45 (UTC)
XE Market Analysis
FX trade was light in N.Y. on Friday, as traders eyed the Christmas break, and soon enough, the end of 2012. Concern over the looming fiscal cliff kept risk taking underwater, as equities fell sharply, supporting the dollar and yen to a degree. Incoming U.S. data was mostly better than forecasts, a personal income, durable orders beat the street, while spending and Michigan sentiment were in-line with expectations. EUR-USD dipped under 1.3160, after opening near 1.3220, while USD-JPY inched to near 84.30 from just under 84.00. Many will be out on Monday through Wednesday, so quiet conditions will likely prevail next week.[EUR, USD]
EUR-USD steadied around the 1.3200 level in early N.Y. trade, after dipping to a three-day low of 1.3179 during the Asia session. The move had come with the USD finding some safe haven demand on news of the cancelled fiscal vote in the U.S., but follow-through proved limited in the seasonally thin market. The pairing moved to 1.3159 lows in light afternoon trade, reportedly tripping light stops at 1.3170, though order books are pretty thin and books fairly square into the Christmas and New Year period. so there was relatively little follow through.[USD, JPY]
The JPY was fairly steady on Friday, after recovering some of its recent losses today, a move that was sparked by risk aversion following the latest impasse in the U.S. fiscal cliff-hanger saga. The news yesterday that the BoJ signaled that it will review its 1% inflation target in favor of a 3% target at its next policy meeting in January had caused the yen to weaken, but Japanese currency had perhaps been ripe for a rebound after quite a big bear run over the last two months. USD-JPY reclaimed the 84 handle after dipping toward 83.85 in Asia, peaking at 84.28. Yen bears have placed USD-JPY orders from 83.90 to 83.60, but movement on the topside now should meet good sell-interest from 84.40, where Japanese banks are holding good orders.[GBP, USD]
Cable was relatively stable just shy of the 1.6250 area after U.K. final Q3 GDP, Q3 current account data and the latest monthly government borrowing data. Growth was downgraded a notch to 0.9% q/q, while borrowing came in worse than expected. The data completed the run of data out of the U.K. this week that reaffirmed the U.K. economic picture of sticky inflation, anaemic GDP performance and a government falling behind its fiscal targets. GBP, a former leader in the currency race to the bottom, has been perky of late, but we don't expect this to last amid the risk of a sovereign downgrade and possible extra boost of BoE QE on the cards for 2013. risk off due to the U.S. cliff saw the dollar rebound in N.Y., taking cable to lows near 1.6155.[USD, CHF]
USD-CHF edged back toward 0.9180 in N.Y., as the move to dollar safety dollar fueled buyers from 0.9110-20. Furthers gains were limited by offers from 0.9180 and there are larger orders at 0.9200 that were added on the way down in the recent bout of dollar selling pressure. The technical backdrop does still point to a test of early May lows around 0.9050 and then the 0.9000 area from late April. However, since the break lower late last week movement has been more patchy as fiscal cliff negotiations and thin year-end trade limits directional bias.[USD, CAD]
USD-CAD made its way back over the 0.9900 mark overnight, with the pairing bouncing to highs over 0.9910 from 0.9880. The pulled GOP "plan B" cliff vote in the House was the catalyst, though since the initial bounce, the pairing more or less stabilized over 0.9900 after peaking at 0.9950. Liquidity was thin going into the weekend in front of Christmas, where, when Monday and Boxing Day are included, many Canadian traders look forward to a five-day weekend.