2013-03-26 07:40 (UTC)
XE Market Analysis
The USD and JPY were supportive overall after yesterday's pick up in euro jitters as investors dissected the details of the Cyprus deal and the long-term implications for the rest of the eurozone. EUR dropped sharply on Monday to close under the 200-dma, which added weight in early Asia. Losses were contained to a degree by sovereign backed support and light EUR-JPY demand. GBP and AUD held up in contrast amid increasing demand for relative safety, leaving them around 1.5200 and 1.0450, respectively. USD-JPY regained its composure over 94.00 following yesterday's drop from just ahead of 95.00 to 93.52 lows on risk aversion. BoJ Governor Kuroda spoke before the Diet today, but his remarks were a reiteration of his first press conference and did not offer anything new for the market.[EUR, USD]
EUR-USD tested the downside and edged into the 1.2845 region during the Asian morning. It met Asian sovereign support on dips and firmed up to 1.2875-80 on light EUR-JPY demand. Movement on the topside was limited by fund names and position traders. Yesterday's close below the 200-dma at 1.2880 should keep bias on the downside in the near-term.[USD, JPY]
USD-JPY regained its composure above 94.00 after dropping sharply from just ahead of 95.00 to 93.52 on Monday as risk aversion overwhelmed Japanese policy risk. Japanese importers were good early buyers and there was increased interest to cover shorts when Kuroda spoke to the Diet, though his remarks were not new. It is looking likely that the BoJ will ease on April 3-4. It will focus on increasing the size and maturity of assets. Kuroda wants to achieve the 2% inflation target in two years. USD-JPY firmed up towards 94.45-50, where short term offers put a top in place and it drifted back to 94.20 by the Tokyo close. Overall, Japanese flows have dropped off as the Japanese fiscal year-end is almost upon us. There may be some residual flows over the next two sessions ahead of the Easter break.[GBP, USD]
GBP renewed some its safety credentials in the wake of eurozone uncertainty; and since BoE Governor King and other MPC members ensured that it was no longer a one-way bet. Against a backdrop of falling equity markets and appetite for safety, cable has performed relatively well, leaving it close to 1.5200 and a moderate distance from mid-March lows around 1.4830. EUR-GBP's fall back from over 0.8550 to lows from early February around 0.8460 has been a major influence and in the short term all markets are likely to be on eurozone watch. In the U.K. today, the CBI retail sales survey is also expected to show modest improvement and will also help to support the pound.[USD, CHF]
EUR-CHF is stuck at 1.2200 after it was unable to sustain higher levels on Monday. A knee-jerk rally over 1.2250 on the Cyprus deal was shortlived and it headed back 1.2190 on broad EUR losses. However, a USD-CHF move on safe haven activity up to 0.9498 highs enabled the cross to steady and it is tied just in front of 1.2200 today. EUR and USD fluctuations will leave the cross rangebound in the near-term, along with outstanding 1.2200 option expiries.[USD, CAD]
USD-CAD risk remains on the downside after it broke below 1.0200 on Monday. There was still appetite to buy CAD$ today even with equity markets struggling after the initial rally on Cyprus dissipated. The March low of 1.0182 should provide initial support, but in the short term the market is gearing up for a stop hunt lower down. Offers should contain corrective action towards 1.0225-30.