2013-04-25 06:35 (UTC)
XE Market Analysis
The dollar was weighed in thin trade as intra-day accounts pushed for stops in EUR, GBP and AUD. The dollar legs got traction from JPY-cross flows, but USD-JPY struggled to make much headway above 99.50 due to large option expiries at 100.00 over the next two days and as the BoJ policy meeting got underway. News flow was generally quiet. In China, there are concerns over bird flu and the potential for it to spread by human-to-human contact after the first case was recorded outside of the mainland. MoF weekly flow data revealed that Japan were net sellers of foreign bonds for the sixth consecutive week by Y862.6 bln from -Y331.9 bln previously. In corporate news, Verizon Communications are reportedly preparing a $100 bln proposal, half cash and half stock, to buy Vodafone's Verizon Wireless stake.[EUR, USD]
EUR-USD started the session just in front of 1.3000 and benefited on EUR-JPY demand out of the 129.50 region. The cross move to 129.90 helped EUR-USD into the 1.3030 region and specs pushed for stops, which carried it to 1.3061 highs. There was evidence of light sovereign demand, though activity was lower than in recent sessions. Adding to the supportive backdrop was the firmer levels in EUR-CHF, which extended to the 1.2345 region on continued speculation over the SNB CHF cap.[USD, JPY]
USD-JPY traded a tight range under 99.50 for the most part after it was unable to sustain higher levels. Large option expiries at 100.00 roll off today and tomorrow, which kept interest low, along with general caution ahead of the BoJ policy outcome tomorrow. BoJ Governor Kuroda said ahead of the meeting that JGB market volatility is high, but it will not scrap the 2% CPI target and most participants expected to see a reiteration of the current policy stance tomorrow. USD-JPY risk is still skewed to the topside, but there are more than $3 bln worth of offers at 100.00, along with significant long term resistance from 100.20. Note, that next week sees the start of the Japan Golden Week holidays and will also dampen volumes.[GBP, USD]
Cable cleared 1.5300 ahead of the first ONS estimate of U.K. GDP, which is forecast to come in at 0.1% q/q. There has been enough strength in the services sector to suggest that the U.K. will avoid a triple dip recession, though economic activity is still poor judging by yesterday and today's forward looking CBI data. A poor number could tip the balance, though Cable has performed relatively well lately in the face of patchy data and increasing expectations of more BoE stimulus. Cable found a temporary base around 1.5200 this week on corporate flow related a large dividend payments and more M&A flow could go through.[USD, CHF]
EUR-CHF is on a firm footing after it broke 1.2300 and burst higher to trade into 1.2340 on Wednesday, which were its best levels since March-14. EUR-CHF posted its biggest one day rally since the middle of March on Tuesday after it surged on speculation that SNB could raise the lower limit on EUR-CHF to 1.2500 from 1.2000. Recent SNB commentary does not suggest an imminent change in the CHF cap, but Monday's SNB monthly data highlighted a rise in non-residential deposits in January and February. EUR-CHF should meet offers ahead of 1.2350, where option barriers are noted and there are a build up of good orders between 1.2370 and 1.2400.[USD, CAD]
USD-CAD headed lower after it was unable to break the top of the recent range. Decent gains across the commodity market complex was the catalyst for CAD$ strength after mixed leads from global equity markets. It headed through support at 1.0240 in early Asia and extended to the 1.0230 region by the close. More bids are tipped at 1.0220 and into 1.0200, but prices are already backing up as the dollar found a modicum of support in early European trade.