2013-04-30 10:33 (UTC)
XE Market Analysis
Movement was a little disjointed in month end trade. Equity markets in Europe headed lower in contrast to moderately firmer levels in Asia, which fueled buying interest on dips via USD, JPY and CHF. EUR continued to struggle over 1.3100 and shorts got some added traction from broadly weak eurozone data, which will keep alive ECB rate cut hopes for Thursday. Cable traded a very tight range close to 1.5500 as positive technical indicators kept it underpinned on dips. USD-JPY's lack of progress over 98.00 weighed and it traded into 98.35. The commodity bloc currencies were mixed. USD-CAD was heavy just ahead of 1.0100 following the slump below 1.0200 late last week, while AUD and NZD were weighed by JPY-cross selling.[EUR, USD]
EUR-USD stalled around 1.3120 after the European open and headed to intra-day lows close to 1.3050. Large offers between 1.3120 and 1.3130 out of the Middle East capped for the second consecutive session, while selling picked up after eurozone data reinforced ECB rate cut expectations. German retail sales dipped 0.3% m/m, German unemployment rose an adjusted 4k and Spanish Q1 GDP fell 0.5% q/q. EUR is still trading at neutral levels currently, with ECB rate cut expectations absorbed by reserve management flows and a reduction in speculative positioning. There could be more choppy two-way action today due to month end and as positions are cleaned up ahead of tomorrow's holiday in mainland Europe. Bids close to the market lie at 1.3050 and towards 1.3000.[USD, JPY]
USD-JPY headed towards 97.35 as yen buying picked up. USD-JPY struggled to sustain movement over 98.00 in Asia and drifted lower with European stocks. Overall, USD-JPY is probably in better shape to make a topside test. However, more sideways to lower action may continue ahead of key central bank policy meetings, along with the below average activity in Asia due to Japan's Golden Week holiday period. On the USD-JPY downside, Monday's 97.35 low will provide near-term support, along with buyers into 97.00. Over 98.00 there are a build up of offers into 98.50 and Friday's consolidation zone between 98.60 and 98.80. The move in the dollar pairing forced EUR-JPY from 128.45 in Asia and it is now close to 127.45, where short term bids were tipped after the European open.[GBP, USD]
Cable option expiries are keeping ranges tight around 1.5500. Early action was influenced by the risk backdrop, but Cable movement over 1.5500 was limited by sell-interest layered from 1.5510 to 1.5530 initially, while Asian account offers remain from 1.5540 ahead of 1.5550 barriers. The underlying tone should remain supportive though after last week's U.K. GDP release offered a bit more optimism on the U.K. outlook and fueled expectations that the MPC wil remain on hold this week. BoE's Miles told business leaders in Northern Ireland that the U.K. had experienced an extremely sharp recession, but predicted that the squeeze on household incomes would end soon. Weakening personal finances was pinned on the overnight fall in the GfK consumer confidence reading from -26 to -27 in April.[USD, CHF]
EUR-CHF moved into 1.2240 after it backed away from 1.2300-05 on Monday. Tentative interest to add EUR shorts ahead of Thursday's ECB meeting fueled a EUR-CHF fall from 1.2280 in early trade. More weak eurozone data added traction to EUR short positioning via the crosses. German retail sales dipped 0.3% m/m, German unemployment rose an adjusted 4k and Spanish Q1 GDP fell 0.5% q/q. USD-CHF was also capped ahead of 0.9400 after it moved into the 0.9350 region on Monday on technical selling and general dollar weakness after stocks gained. However, today's European equity market backdrop is more defensive after eurozone data. There is also short term repositioning going through due to month-end window dressing and ahead of tomorrow's European holiday.[USD, CAD]
USD-CAD added to losses to traded into the 1.0110 region. The weaker technical backdrop was weighed by the better risk backdrop. Corporate buyers are lined up down to the 1.0100 region, which has slowed downside momentum. To the upside, significant selling interest is not seen until the 1.0200 mark, where option backed offers have been reported.