2012-12-18 06:41 (UTC)
XE Market Analysis
Market sentiment was positive on optimism that progress is being made on the U.S. fiscal cliff negotiations, but volumes remained low overall, which kept the G10 FX confined to the recent trading range. The USD and JPY were a bit easier on speculative flows, which left the EUR close to 1.3170, Cable above 1.6200 and USD-CHF around 0.9170. USD-JPY traded just over 84.00 after the Japanese press said the LDP are planning a supplementary budget to boost the economy. BoJ Governor Shirakawa also met LDP leader Abe ahead of tomorrow's BoJ meeting, which reinforced expectations of an asset purchase increase from the Bank. The RBA minutes did not hold any surprises after the recent rate cut, while China's NDRC said there is plenty of room to lower the bank reserve ratio requirement in 2013.[EUR, USD]
EUR-USD was supported ahead of 1.3150 by Asian commercial interest, though reserve management flows have dropped off compared to last week. Bias still remains on the topside on positive risk appetite and a bullish chart pattern. However, volumes have clipped momentum underneath 1.3200, where an outstanding option barriers is noted. Light stops will feature over 1.3200, yet follow through may be contained by offers from 1.3230 to 1.3250.[USD, JPY]
JPY traded on the easier side ahead of tomorrow's BoJ meeting, where more policy stimulus is widely expected after the recent data weakness, which tipped Japan into recession. USD-JPY met Japanese buyers around 83.85-90 and it moved back over 84.00. The Japanese press said a supplementary budget will be made ahead of the regular budget and will feature more fiscal stimulus. Meanwhile, a meeting between BoJ Governor Shirakawa and LDP leader Abe raised expectations that BoJ is under pressure to change its inflation target to 2%.[GBP, USD]
Cable continued to trade a tight range close to 1.6200 in Asia after demand went through on Monday via a Middle Eastern name and corporate accounts. Movement over 1.6200 has been contained by offers from 1.6220 to 1.6250 and the downside is underpinned from bids at 1.6190 to 1.6170. Market interest has been patchy elsewhere due to a drop off in liquidity into year-end, but Cable is in territory where relatively good two-way flows are noted.[USD, CHF]
USD-CHF remained heavier since it broke below the 0.9200 level after last Friday's European close. However, it has met natural demand ahead of 0.9150, while sellers have lined up orders into the 0.9190-00 area. Market sentiment remains positive, which sets up the dollar pairing for a test of early May lows around 0.9050 and then the 0.9000 area from late April. However, into the year-end price action may become disjointed and limit directional bias.[USD, CAD]
USD-CAD remained under 0.9840 after it drifted lower on Monday amid equity and oil market gains, which aided the loonie, though trade was said to be thin. Light stops were seen under the 50 level, though ongoing corporate demand slowed downside progress. Bids are noted from 0.9825 and good technical support is seen just under 0.9800.