2013-04-29 06:37 (UTC)
XE Market Analysis
The G10 FX traded in a tight range in quiet trade. Market activity was dampened as Japan and China were closed for a public holiday. JPY firmed up on further position adjustment by speculation yen shorts, which sent USD-JPY to 97.35 lows. EUR-USD maintained a relatively tight range ahead of 1.3000. There was mild support from news that Italy had managed to form government. However, upside momentum is still limited ahead of this week's ECB policy decision. AUD-USD firmed up from 1.0270 back over 1.0300 on corporate hedging, along with light speculative flows as the ASX 200 closed in positive territory.[EUR, USD]
EUR-USD continued to trade a very narrow range ahead of 1.3000. There was mild support early on from news that Italy formed a government. It traded to 1.3075, but struggled to sustain higher levels due to offers from proprietary accounts and fund names that are positioning into this week's ECB policy decision, where the potential for a rate cut has risen after poor eurozone data. EUR-USD's lack of downside progress in recent sessions is due to heavy reserve management flows out of Asia and there is more demand tipped on dips from 1.3000 to the 1.2950 region.[USD, JPY]
USD-JPY and the JPY crosses came under pressure in holiday thin trade. The technical backdrop for USD-JPY and EUR-JPY were negative after Friday's sell-off, where yen shorts reduced positions after the BoJ's steady policy hand. A lack of overseas investment flows have limited the scope for USD-JPY to break 100.00, while heavy Japanese hedging went through late last week into the Golden Week holidays, leaving a negative tone today. USD-JPY cleared out stops under 97.50 and extended to 97.35 in thin trade and EUR-JPY fell from 98.00 to 127.20.[GBP, USD]
Cable triggered buy stops after 1.5500 barriers gave way during the Asian session. The pound has been well supported since last week's better than expected U.K. GDP data, which reduced BoE policy easing expectations into this week's BoE meeting. Forward looking U.K. data has still be weak though suggesting that the U.K. recovery will remain gradual. Overnight, there was second tier data released. The Lloyds April Business Barometer improved to 27 versus 20 previously, while the Hometrack April housing survey rose 0.3% m/m and 0.2% y/y. Meanwhile, a quarterly report from Ernst & Young said that U.K. business lending will rise 3% this year due to the BoE's Funding for Lending Scheme.[USD, CHF]
EUR-CHF is trading close to the 1.2300 region following last week's strong rally, which lifted it within a pip of 1.2350 barriers. Price action has been corrective on repositioning and underlying support for safety plays. The CHF benefited against the USD after Friday's U.S. GDP miss, while EUR rallies are being sold into amid speculation that the ECB will cut rates this week after the recent run of poor data.[USD, CAD]
USD-CAD remained heavier after it fell under 1.0160 on Friday, levels last seen on April 16. Despite the mixed risk backdrop, and softer U.S. GDP, the CAD managed to strengthen. Dealers reported good selling interest around 1.0200, which weighed on the pairing, while some stale longs ;were unwound into the weekend, and ahead of this week's Canadian GDP and trade data.