2013-04-15 07:13 (UTC)
XE Market Analysis
The dollar and yen rallied as risk aversion dominated following Friday's more defensive market tone and today's weaker than expected China economic data releases. AUD saw the biggest impact from the shift in market tone as further losses in gold exacerbated a move from 1.0500 down to 1.0417 intra-day lows. EUR-USD pulled back from over 1.3100 to trade into 1.3065 and Cable reverted to 1.5310 from 1.5380. The China data is likely to fuel talk of more policy easing after inflation data slowed, though a pick up in capital inflows from expansionary policy elsewhere could be a problem for policy makers. The U.S. Treasury released its semi-annual report on FX and said CNY remain significantly undervalued, but China is not a currency manipulator. It will closely monitor Japan's policies and will press it to refrain from competitive devaluation.[EUR, USD]
EUR-USD was weighed by the move into safety. It posted an early move up to 1.3150 in Asia Pacific trade and then eased back into 1.3100. China data added traction to EUR shorts and it headed into 1.3065 on deep EUR-JPY selling. This risk off theme is likely to dominate in early Europe, while recent movement has also indicated more restrictive action on the EUR topside. There are still very good offers into 1.3145-50 and these have marked a top in the recent range. Interim support is anticipated at 1.3035, which were Friday's lows and kept the psychological 1.3000 level intact.[USD, JPY]
USD-JPY lost ground after it was unable to sustain early buying interest. It chopped either side of 98.00 early on and extended to 98.70 after comments from BoJ Governor Kuroda, who offered his commitment to reaching the CPI inflation target. Thereafter, yen movement was dominated by risk aversion after weaker than expected data from China squeezed out speculative positions. The dollar pairing triggered stops through 97.70 to reach 97.55 lows, while EUR-JPY turned away from 129.30 to reach lows of 127.56 before a recovery set in on bargain hunting. Japanese importer bids were noted in USD-JPY at the lows and it headed back over 98.00 and there may still be some residual speculative demand for the JPY crosses given today's sizeable corrections.[GBP, USD]
Cable posted modest losses after it ran into selling pressure from 1.5380 after another failed attempt to sustain a move over 1.5400 in overnight trade. The risk off tone fueled a move into 1.5310, where good support was noted. It has steadied into the European session, but the move out of risky positions is likely to encourage dollar buyers on dips and risk may be on a move under 1.5300 intra-day. Under 1.5300 there is decent support noted towards 1.5250.[USD, CHF]
USD-CHF found support again around lows from late February at 0.9270 overnight. The move out of risky positions was the catalyst for firmer levels and enabled it to trade back over 0.9300. EUR-CHF traded on a heavier footing as EUR weakness fueled a move back towards 1.2155, where good support was noted in recent sessions. The CHF is likely to maintain a range bound tone as USD and EUR fluctuations drive intra-day flows. USD-CHF looks weak on a technical basis, but dollar safety plays should support, while EUR-CHF's underlying tone is still skewed to supply on upticks.[USD, CAD]
USD-CAD added to Friday's gains as a sharp drop in commodities fueled heavy CAD$ selling. It traded out of 1.0130-35 and headed to the 1.0200 area. Intra-day stops were filled between 1.0150 and 1.0170, which triggered follow through fund interest. CAD-JPY unwinding also featured as Japanese spec repositioned into the Tokyo close. USD-CAD has met tentative selling in early Europe, which fueled a slightly easier tone into 1.0185, but near-term risk is on stops through 1.0200.