2013-04-16 07:19 (UTC)
XE Market Analysis
European participants are digesting yesterday's heavy deleveraging, which resulted in heavy yen and dollar gains into the Asia Pacific open. Thereafter, there was significant bargain hunting via USD-JPY and the JPY crosses, which has left the FX majors largely unchanged from Monday's opening levels. That said, commodity markets are still nursing significant losses and currently sit at much weaker levels, which will keep alive the safety bid in the USD. EUR has struggled to sustain higher levels in recent sessions and is likely to run into selling pressure on upticks, while yesterday's bearish outside day also increases the risk of another test of 1.3000 in due course. USD-JPY is marking time around 97.50 after it rebounded from levels under 96.00 in Asia. Ahead of the weekend G20 further yen weakness may be more contained. Another potential yen positive is news that Dish is looking to thwart the takeover of Sprint Nextel by Softbank. Softbank hedged $20 bln of the deal late last year when USD-JPY was 82.20 and may have a big position to unwind if it falls through.[EUR, USD]
EUR-USD started the session around 1.3030 after it registered lows of 1.3023 in late N.Y. after the heavy flight to quality bid. It posted modest gains after the open and extended to 1.3080 on a strong EUR-JPY rebound. Direct flows in EUR-USD were more limited, but it was encouraging for longs that support in front of the psychological 1.3000 level held and it is back in familiar territory around 1.3070 as the European session gets underway. However, EUR-USD's lack of sustainable moves over 1.3100 should fuel selling pressure on upticks and another risk-off session could reinforce downside pressure.[USD, JPY]
JPY saw very heavy flows. Early action was dominated by enforced liquidation by leverage funds after the rout on commodity markets, which continued in early trade before prices settled over the course of the Asian afternoon. USD-JPY broke 96.00 and extended into the 95.80 area, but once Tokyo opened there was significant demand for Japanese importers, as well as offshore fund names. It rose quickly to the 97.00 region and extended to 97.70 highs over the course of the Asian afternoon. EUR-JPY turned from just under 125.00 to 127.80 and AUD-JPY jumped from early lows around 98.75 to 101.37 highs. The recovery in USD-JPY and the crosses was mirrored by moves via the Nikkei and there was speculation that the authorities may have been supporting the stock market today.[GBP, USD]
Cable continues to tread a relatively narrow range with most of the focus elsewhere following Monday's heavy deleveraging, which was followed by deep bargain hunting via the JPY crosses in Asia. Cable sits around 1.5300 close to the middle of its recent range. Cable is still supportive while it holds above April-08 lows around 1.5240, though progress on the upside will be dependent on equity market performance. In recent sessions movement over 1.5350 met good offers and there are outstanding option strikes into the 1.5400 region to contend with today.[USD, CHF]
CHF remains supportive, but the rebound in the EUR crosses overnight after heavy EUR-JPY demand went through lifted EUR-CHF out of 1.2137 at the Asia Pacific open back over 1.2150 by early Europe. USD-CHF is choppy around 0.9300 as the dollar lost some of its safety bid as Asian stocks cut losses and S&P futures rallied. However, given the depth of Monday's deleveraging the dollar should maintain support on dips.[USD, CAD]
USD-CAD is holding up above 1.0200 after it soared to 1.0259 highs on Monday following the awful risk backdrop, which included a sharp sell-off in gold and oil prices. Previous resistance around 1.0200 should effectively support the pair on dips today and more buying interest is tipped into 1.0170. USD-CAD did pullback to 1.0213 lows by late Asia, but buyers have kept it close to 1.0220-30 since the European session opened.