2013-03-15 10:50 (UTC)
XE Market Analysis
The dollar continued to correct lower as short term accounts reduced positions following yesterday's technical rebound via Cable and EUR. Cable headed over 1.5150 in Europe as large option positions reinforced the upswing, which gained positive momentum after BoE Governor King said GBP is now properly valued at current levels. JPY edged lower in Asia after the upper house passed the vote for the three BoJ nominees as expected, leaving USD-JPY ahead of 96.00, though momentum was restrained by exporter offers. The commodity bloc held up in Europe on position adjustment despite softer European equities, but the commodity complex benefited from the dollar downturn. In the U.S., there is a heavy data calendar to digest and in recent sessions positive releases have fueled dollar buying interest. It includes February CPI, the March Empire State index, January TIC flow data, and February industrial production.[EUR, USD]
EUR-USD added to Thursday's gains as European accounts covered shorts. Offers between 1.3030 and 1.3050 were filled and light stop loss activity carried it to the 1.3070 area. Dollar buyers suffered from exhaustion on Thursday and booked profit, which was the catalyst for a decent squeeze from the 1.2910 area. Asian names have been amongst the buyers today, along with short term funds. A move up through 1.3075 would negate the long-term downtrend and could reinforce a more consolidative trading pattern ahead. It will be interesting to judge the market reaction to today's U.S. as recent data strength encouraged dollar buyers based on the better macro outlook.[USD, JPY]
USD-JPY firmed up to the 96.30 area in Asia on importer demand and short term interest after the upper house voted in favour of the three BoJ nominees, while the government also upped its economic assessment for the third straight month. USD-JPY struggled to sustain higher levels in Europe due to exporter offers and order flow from range players and this looks likely to cap into the weekend. The JPY crosses were supportive, with EUR-JPY trading above 125.50 on EUR short covering. AUD-JPY was easier due to option related offers ahead of 100.00, which capped on Thursday and left it close to the 99.70 area.[GBP, USD]
Cable moved into 1.5150, where very large option strikes are rolling off today. There are also more than a yard of strikes rolling off at 1.5100, which was in part the catalyst for yesterday's sharp short squeeze, along with talk that Qatar may invest up to GBP 10 bln for infrastructure projects. It was notable that U.K. account demand was heavy during the European afternoon and came ahead of the U.K. television interview with BoE Governor King, who said it was not trying to push GBP lower and is now properly valued. There is more interest for GBP topside in the options market with one week 1.5300 going through.[USD, CHF]
EUR-CHF pulled back to 1.2310 after it was unable to sustain firmer levels on Thursday. Large offers capped from 1.2370 following SNB's steady policy hand, while a USD-CHF retracement from new trend highs of 0.9567 triggered swissy demand. The dollar pairing traded into 0.9450 in tandem with moves back into European currencies. On an intra-day basis, EUR-CHF looks likely to trade the range with support noted into 1.2300 and offers beginning to enter the market from 1.2345-50. USD-CHF will take its guidance from the U.S. data releases due later today, but may be at levels where dollar bulls will have more confidence in adding positions.[USD, CAD]
USD-CAD is heavier after it experienced aggressive selling on Thursday after it took out stops at 1.0240 to print three week lows around the 1.0205-10 area. Short term specs, which were active on the way down on Thursday, may be tempted to test 1.0200, where another round of stops are tipped just below. Offers on the topside are now lowered into 1.0240-50, which was a previous prop in recent sessions.