2013-04-16 10:31 (UTC)
XE Market Analysis
The dollar consolidated after it was unable to add further to Monday's gains, while JPY came under pressure on a heavy round of bargain hunting, which was evident since the Tokyo open. USD-JPY rebounded from Asian lows around 95.80 back over 97.50 in Asia and it extended to 98.00 in Europe. The move gave positive resonance for commodity traders and gold recovered to $1390.80 versus trend lows of $1322 in Asia. EUR dipped after a plunge in German ZEW to reach 1.3028 lows, where strong bids, along with EUR-JPY demand fueled a short covering rally to 1.3090. Cable was unchanged from European opening levels around 1.5300 despite a brief dip after U.K. CPI met expectations and PPI eased. The commodity bloc currencies also posted a modest recovery, which left USD-CAD around 1.0220 and AUD-USD around 1.0370.[EUR, USD]
EUR-USD dipped after German ZEW weakness. Weak longs were stopped out through 1.3030, but it fell short of Monday's N.Y. lows around 1.3023 as strong standing bids encouraged a short covering rally to 1.3090. EUR-JPY's move back over 128.00 was a positive lead as stocks and commodities stabilized, though overall EUR bias remains on the downside after the lack of sustained upside movement over 1.3100 in recent sessions. On the downside, a break of the psychological 1.3000 will trigger a number of longs to liquidate positions. Intra-day offers lie just ahead of 1.3100 and over 1.3100 upside movement will remain limited under resistance from 1.3150.[USD, JPY]
USD-JPY traded at 97.90 rally highs after Tokyo based accounts lifted the pair out of 97.30 at the London open. USD-JPY is in better shape based on market positioning and from a technial perspective following the heavy yen gains after deleveraging of speculative positioning. Buyers of USD-JPY from 96.00 and below include importers and offshore funds, with the long-term trend still pointing to a retest of 100.00. However, ahead of the weekend G20 meeting upside momentum may be more contained. U.S. Treasury warned Japan against competitive devaluation in its latest semi-annual FX report and other G20 countries have grumbled over Japanese policy despite assurances that it is aimed at tackling deflation rather than the currency. Another potential wild card is the Softbank Nextel bid, which could become a bid war after U.S. satellite TV provider Dish has offered to merge with Sprint Nextel. On the plus side, Softbank is long of USD-JPY around 82.20, though the $20 bln position is a potential risk for USD-JPY longs if it is forced to unwind.[GBP, USD]
Cable dipped after U.K. inflation data. It fell back from just over 1.5300 and headed towards supportive bids from the 1.5270 area, while EUR-GBP was boosted from 0.8525 to 0.8540. CPI met expectations at 2.8% y/y, but producer prices eased in March, which is a welcome development for BoE QE expectations. Sterling flows have been relatively low since the start of the week, with the focus for intra-day accounts coming from elsewhere. There are no ground breaking developments from a macro perspective and from a technical perspective Cable is also in the middle of the recent range. Longs are still buying in front of April-08 lows around 1.5240, while movement into 1.5350 has been contained since late last week.[USD, CHF]
CHF remains supportive, with European markets still fairly cautious after the deep losses in risk markets on Monday. An overnight recovery in the EUR helped EUR-CHF out of 1.2135 support, but upside movement remains limited ahead of 1.2170, which has been the case since late last week. USD-CHF remains 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 and buyers are tipped just under 0.9300 and ahead of support at 0.9265-70, which held on Monday. The reaction from Swiss PPI was muted. It was slightly below expectations and underlined the importance of SNB's current policy stance. It has successfully defended the EUR-CHF downside since it put the 1.2000 lower limit in place.[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.