2012-12-17 08:06 (UTC)
XE Market Analysis
The market is consolidating after Asian trade was dominated by the landslide election victory for Japan's LDP, which will give it a strong mandate to push on with aggressive policy stimulus. JPY gapped lower as a result, but follow through was contained by Japanese profit taking via the JPY crosses and option related interest via USD-JPY. Early European action has been fairly restrained, with overstretched positioning keeping interest light. CFTC data released Friday revealed a further increase in yen shorts, while Aussie longs moved to new record highs. Meanwhile, the EUR gained traction on the topside on EUR-JPY demand, but topped out ahead of 1.3200 barriers. European markets will key off the risk backdrop amid a relatively thin calendar, while in the U.S. fiscal cliff negotiations will dominate the outlook there.[EUR, USD]
EUR-USD moved up to 1.3192 highs in early Asia after EUR-JPY gapped over 111.00. However, profit taking via the cross back towards 110.50 weighed on EUR-USD and it headed back to 1.3150 by late Asia. The downside was limited by central bank interest on dips, while short term buyers continue to key off a more supportive technical picture and the more stable tone in the eurozone. The outlook for EUR remains on higher levels and buyers are tipped from 1.3150 to 1.3130. On the topside option related sellers are noted from 1.3200 ahead of early May highs around 1.3240 and 1.3285.[USD, JPY]
USD-JPY and the JPY crosses gapped higher at the Asia-Pacific open after the landslide victory for the LDP. The LDP-Komeito coalition won an outright majority, which will make it easy to bills through the Diet and should mean more innovative and aggressive policy to get the Japanese economy out of recession. USD-JPY reached 84.48 in early trade, but met a round of profit taking after good liquidity was noted ahead of outstanding option barriers at 84.50. It pulled back to 83.85, but met good demand on dips from both Japanese and U.S. accounts. EUR-JPY cleared 111.00, GBP-JPY jumped to 136.40 and AUD-JPY moved over 89.00 on offshore leverage account demand, though a modest round of profit taking went through as Japanese accounts were noted on top of the market.[GBP, USD]
GBP traded into the 1.6200 area in Asia after GBP-JPY jumped after the Japanese election outcome. As liquidity picked up profit taking set in and Cable drifted into 1.6160. However, relatively firm equity markets and a positive technical picture fueled dip buyers, leaving the focus on option expiries at 1.6200 and buy stops a bit higher up. Offers are noted from 1.6220 to 1.6250.[USD, CHF]
USD-CHF remained under pressure as broader dollar moves left risk skewed to lower levels. USD-CHF traded at 0.9150 in Asia before natural demand went through to take it back towards 0.9200. Upside movement thereafter was limited due to a bearish underlying tone and positive equity market sentiment.[USD, CAD]
USD-CAD edged up through Friday's N.Y. highs to reach 0.9870. The move higher was against the grain of stocks and commodities, which are holding up generally after the Japanese election victory and policy hopes from China. On Friday, CAD$ was weighed on after news that S&P downgraded six Canadian financial institutions by a notch, which was an excuse for short term accounts to turn positions after 0.9820 stops held for the second session. Offers are tipped now from 0.9880 to 0.9900.