2013-04-24 19:52 (UTC)
XE Market Analysis
FX trade was extremely quiet through the N.Y. session, with major dollar pairings held inside of narrow ranges. EUR-USD spent its time on either side of 1.3000, while USD-JPY was stuck largely between 99.25 and 99.50. A weak March durables report had little market impact, as Wall Street indices moved between positive and negative through the session. Thursday's U.S. calendar will reveal weekly jobless claims, though overall, the FX market looks set to stay in the doldrums for now.[EUR, USD]
EUR-USD was weighed by EUR-JPY selling, which accelerated into 129.00 after the wide U.S. durables miss. An overhang of offers in the cross capped on the approach of 130.00, which set the tone in early N.Y. EUR-USD also could not overcome offers into 1.3050 despite the better risk backdrop in Europe, with ECB rate cut expectations weighing. The 200-dma under 1.2940 is still a potential target for shorts, though both semi-official and sovereign flows in favor of the EUR have accelerated sharply this week. Outstanding options at 1.3000 and 1.2995 could tie prices up for a short period over the next hour, but selling into strength remains the theme.[USD, JPY]
USD-JPY was stuck just under 99.50 in morning trade, where large expiries rolled off. The Y100 level is still elusive, but there is optimism that it might trade towards the latter part of the week. Big expiries are set to roll off on Thursday and Friday. Tomorrow sees interest in excess of $1.5 bln, though one fund name sold Thursday Y100 strikes and bought Friday Y100 in $3bln today suggesting that big barrier exposure will run at least into Friday. Japanese banks tell us that they note orders up to $3 bln at that level on the EBS dealing platform and the number could be much higher taking into account other dealing platforms. Above 100.00 there is big monthly Ichimoku cloud top at 100.20 and more barriers from 100.25 up to 101.00.[GBP, USD]
Cable eyes 1.5300 as market participants look ahead to tomorrow's first ONS estimate of U.K. GDP, which is forecast to come in at 0.1% q/q. There has been enough strength in the services sector to suggest that the U.K. will avoid a triple dip recession, though economic activity is still poor judging by yesterday and today's forward looking CBI data. Cable found a temporary base around 1.5200 this week on corporate flow related a large dividend payment today and one early next week from two major U.K. heavyweights. A poor number tomorrow could tip the balance, though Cable has performed relatively well lately in the face of patchy data and increasing expectations of more BoE stimulus.[USD, CHF]
EUR-CHF overcame early local name selling ahead of 1.2300 and burst higher to trade into 1.2340, which were its best levels since March-15. The move higher cleared away option barriers, which were set to roll off today, along with large plain vanilla strikes. EUR-CHF posted its biggest one day rally since the middle of March on Tuesday after it surged on speculation that SNB could raise the lower limit on EUR-CHF to 1.2500 from 1.2000. The talk added traction after EUR-CHF cleared resistance between 1.2220 and 1.2250 on Tuesday. There was speculation that decent interest to sell CHF in favour of gold went through, along with a U.S. account buy recommendation in USD-CHF. Recent SNB commentary does not suggest an imminent change in the CHF cap, but Monday's SNB monthly data highlighted a rise in non-residential deposits in January and February.[USD, CAD]
USD-CAD moved back to the top of its range into the London close, after finding support into 1.0250 (again). Option strikes at 1.0290 rolled off at the 10:00 EDT cut, and appeared to have brought some buying interest into the fray. This said, standing offers from 1.0275 continued to cap a very uninspiring CAD trade, and the pairing eased back to 1.0250 into the close.