2013-04-03 10:27 (UTC)
XE Market Analysis
European markets were quiet ahead of tomorrow's key central bank policy meetings. Fund names were early dollar buyers, but it was unable to build on gains, leaving last week's highs intact. USD-CHF fell short of buy stops from 0.9530 and EUR-USD recovered from an early low around 1.2790 to trade back over 1.2830. There was light EUR demand after IMF reached an agreement with Cyprus for EUR 1 bln, adding to further signs that the situation is slowly stabilising. JPY remained offered ahead of Thursday's BoJ policy decision, where further easing is widely expected. There was only limited interest to buy USD-JPY though, which chopped either side of 93.50, while EUR-JPY saw some long positions being established under 119.50 and it briefly traded over 120.00.[EUR, USD]
EUR-USD recovered after it only spent a short period of time under 1.2800. EUR buying picked up after the IMF reached an agreement with Cyprus for EUR 1 bln in aid, according to a statement. EUR-JPY demand featured on the way up, with the cross recovering from 119.45-50 back over 120.00 as fund names position ahead of tomorrow's BoJ policy outcome. EUR-USD options at 1.2750, 1.2780 and 1.2800 may limit further movement ahead of tomorrow's ECB outcome. Topside movement should meet sellers towards the 1.2850 region and offers reportedly increase around the 200-dma at 1.2885.[USD, JPY]
USD-JPY is hemmed in by option expiries maturing at 93.30 and 93.70 for today's N.Y. cut. Usual intra-day flows have dropped off ahead of tomorrow's BoJ policy announcement. After dropping to four week lows of 92.56 during Tuesday's Asian session it rebounded back over 93.50 during European and U.S. hours and extended to 93.68 highs in today's Tokyo session. However, apart from some light position adjustment there was no appetite to force a break of range. BoJ Governor Kuroda has already tipped an increase in asset purchases and longer duration, but could start his term cautiously. He is still waiting approval of his full five-year term and may not want to court controversy until after his Diet approval later this week.[GBP, USD]
GBP dipped briefly after U.K. construction PMI fell to 47.2 in March from 48.00 previously. Cable pulled back from 1.5115 to 1.5090, but regained the 1.5100 handle amid modest size 1.5100 expiries for today's N.Y. cut. EUR-GBP pulled back from 0.8490 to trade into 0.8480, but has been underpinned since it rebounded out of six week lows of 0.8416 on Monday. EUR long position building looks likely to be limited ahead of tomorrow's ECB meeting, while for Cable bias has turned to the downside after it stalled above 1.5250 for two consecutive sessions, which follows the pattern seen last week. GBP traders are cautious ahead of the BoE policy outcome tomorrow, but a steady hand is widely expected.[USD, CHF]
CHF weakened since the European open, driven by a USD-CHF bid. Model funds had an early interest after a general dollar bid in Asia fueled a move back across 0.9500. Longs are targeting Monday's highs at 0.9527, where buy stops are tipped ahead of last week's 0.9554 highs. The USD-CHF move enabled EUR-CHF to trade back over 1.2180 from 1.2165 at the open. During Tuesday's session a stop hunt fueled a move under 1.2150, but it snapped back from 1.2135 lows. Overnight, ECB's Coeure said the ECB is not worried by SNB interventions and doesn't see any negative impact from its current policy stance.[USD, CAD]
USD-CAD ranges narrowed up after it was unable to sustain lower levels on Tuesday. It found support into 1.0120 as a layer of corporate bids held the pairing up and recovered back over 1.0150 on short covering. Equity markets were pressured in Asia and Europe, which weighed on CAD$, but equally there was no momentum to force out offers higher up. These remain in place from 1.0170-80 and into the 1.0200 region and more rangey action looks likely in the near-term ahead of key event risks later this week.