2012-12-27 16:10 (UTC)
XE Market Analysis
U.S. fiscal cliff nerves influenced a thin N.Y. market. Comments from Senate Leader Reid suggested that the gap between the GOP and Democrats has not narrowed and increased the risk of going over the cliff. The dollar rallied, which forced EUR-USD under 1.3220 from just over 1.3280. EUR-JPY was influential after short term accounts got caught long over 114.00 and it plunged to 113.40. However, a marked pick up in Japanese jawboning since the weekend encourage yen selling pressure on upticks, leaving USD-JPY close to 86.00 after it printed new highs of 86.15 after the N.Y. open. In Asia, Japan sees a heavy economic data calendar, which includes CPI, employment, industrial production and retail sales. However, economic data may only have a minor impact given rising expectations of more aggressive policy steps from the BoJ and the Japanese government.[EUR, USD]
EUR-USD slumped as thin holiday markets exacerbated the pullback, which came on U.S. equity market weakness amid fiscal cliff nerves, and after the plunge in U.S. confidence. EUR fell quickly from 1.3275 under 1.3225 after stops gave way under 1.3250. EUR-JPY was influential on the way day as short term accounts got caught long over 114.00 and it plunged to 113.40. The big picture theme should not change much, with the daily chart set up still supportive for EUR-USD. EUR-JPY is bullish, but the pace of the recent gains and the lack of market depth is a warning for short term accounts ahead of the year-end. However, bias for the EUR is still turned to higher levels by virtue of supportive technical studies, which encourages bids from 1.3230 to 1.3200, though offers are congested from 1.3270 to 1.3300.[USD, JPY]
JPY extended to fresh lows in early N.Y. USD-JPY breached 86.00 barriers and topped 114.00 after more Japanese jawboning overnight reinforced expectations of policy stimulus. Japan Finance Minister Aso said BoJ monetary easing alone won't work unless there is private-sector demand to borrow money. Japan Economics Minister Amari said it will compile stimulus steps in early January and will work hard to meet market expectations that are behind recent share price gains and a weaker yen. Meanwhile, Japan Advisor Hamada said BoJ foreign bond buying could be a policy option.[GBP, USD]
Cable corrected to just under 1.6125 after it topped out just over 1.6200 late on in the European morning. It elicited support after the dollar eased in thin trade amid firmer equity markets. EUR-GBP two-way flows provided a light influence on the periphery, but overall Cable was underpinned by positive technical studies and corporate hedging. Interest may drop off with the focus likely to come from the U.S. fiscal cliff now.[USD, CHF]
USD-CHF moved back towards 0.9150 as fiscal cliff nerves picked up after Senate Leader Reid cast doubt on a deal before year-end. During the European session and early N.Y. buyers appeared just under 0.9100 following the pullback from 0.9135, which came on a supportive equity market backdrop.[USD, CAD]
USD-CAD held 0.9900 in early trade as buyers emerged from 0.9910. In the absence of domestic data focus came from the U.S. ahead of the weekend. The daily chart set up suggested more range trading. The risk off tone fueled the move back over 0.9940, but short term longs have been turning positions into 0.9950 as several resistance levels are noted between 0.9955 and 1.0000.