2013-05-01 06:35 (UTC)
XE Market Analysis
Interest in the FX market was muted overnight as most centers are closed for a public holiday in Asia and Europe today. This dampened the impact from China official PMI data, which eased to 50.6 in April from 50.9 in March. South Korea trade data also revealed more export weakness, which rose just 0.4% in Aprl from a year earlier versus 0.2% in March. Australia April manufacturing PMI fell once again by 7.7 points to 36.7 from 44.4 previously, but new home sales rebounded by 4.2% m/m in March after a 5.3% plunge in April. The dollar consolidated after Tuesday's drop, leaving EUR close to 1.3160 and Cable around 1.5530. AUD-USD was a touch easier and pulled back from 1.0380 to sit in the 1.0365 region by the close. USD-JPY tested the 97.00 region for the second consecutive session, but option backed bids underpinned.[EUR, USD]
EUR-USD held on to a firmer tone following Tuesday's strong rally, which was exacerbated by the U.S. data mixed. There were also reports of good corporate demand, along with month-end related flow via EUR-GBP, which reinforced the upswing. In Asia, it met offers from 1.3180 just shy of yesterday's 1.3185 top, while the downside was supported throughout from 1.3160. Bids are likely towards 1.3140-50 and 1.3120, while 1.3200 is reportedly the top of an outstanding option position and also the recent top on April-17 and April-18.[USD, JPY]
USD-JPY ran into early selling pressure from the 97.50 region and tested support in front of option positions at 97.00. The downturn in USD-JPY was exacerbated yesterday by broad dollar weakness after mixed U.S. data raised expectations that the Fed could shift its language in today's policy statement. JPY has been more supported since the BoJ left policy on hold last week, while its policy statement and accompanying presser from Kuroda did not offer anything new for yen bears to get their teeth into. Interest to sell USD-JPY is likely towards 97.80 and 98.00, while the downside could become increasingly vulnerable after the Fed. Stops are noted under 97.00.[GBP, USD]
Cable is holding firm after it extinguished 1.5550 barriers during Tuesday's N.Y. morning session after it rallied in line with the EUR-USD upswing. The move higher bodes well for further gains. Good support into the low 1.54s has held since last week's U.K. GDP release, which reinforced expectations of a steady policy hand from the BoE this week. There is widely reported resistance into 1.5575 and outstanding barriers at 1.5600 that could encourage light profit taking on upticks, though stops could be vulnerable in thin European trade today.[USD, CHF]
EUR-CHF steadied after Tuesday's move into 1.2230, which came on the back of tentative interest to add EUR shorts ahead of Thursday's ECB meeting. The EUR-USD upswing provided a modicum of support on dips, while USD-CHF has also found buyers under 0.9300 into the London open, leaving the cross close to 1.2250. Appetite to selling the CHF may be limited in the next session or two as market participants await the FOMC outcome and tomorrow's ECB policy decision.[USD, CAD]
USD-CAD remains heavy around 1.0060 after registered its weakest levels since April-11 on Tuesday at 1.0055. CAD$ had been on the front foot this week, with stocks holding firm and commodity markets recovering. Yesterday's firmer Canadian GDP reading generated momentum through corporate backed dollar bids, though we are in territory where order flow is expected to pick back up again. There are a lot of bids from into the 1.0050 region and it wouldn't be a surprise to see option related demand pick up lower down due to knock out exposure between 1.0050 and the psychological 1.0000 level. Since Monday's close 1.0125-30 offers have capped.