2013-05-10 07:26 (UTC)
XE Market Analysis
The dollar is on the front foot after yesterday's strong buying interest. There was no specific catalyst and market participants have pinned it on several factors. A large real money buy order went through after U.S. jobless claims hit five year lows, which fueled more speculation over Fed QE tapering. Meanwhile, there was talk that China may diversify holdings of foreign reserves in favour of the dollar. USD-JPY stops added traction to the move after it cleared 100.00. EUR headed towards 1.3000, Cable moved into 1.5425 and AUD-USD broke its long term trend on the way to 1.0050. Intra-day accounts are more likely to focus on repositioning rather than economic data in Europe. The market is also likely to be sensitive to Fedspeak in the U.S. after Fed QE tapering speculation resurfaced on Thursday.[EUR, USD]
EUR-USD found a bid from 1.3010 in early Asia Pacific trade after it tumbled from 1.3100 on broad dollar strength. EUR-JPY strength lifted it back to 1.3050 over the course of the Asian session. There was sporadic interest from soveriegn names on dips, along with option related flows. However, the upside was limited as Thursday's break lower left the balance of risk on the downside. Note, that movement under 1.3000 in late April did see a marked pick up in corporate hedging, while reserve diversification has also been a persistent theme on corrective EUR action.[USD, JPY]
USD-JPY and the JPY crosses saw marked buying interest following yesterday's USD-JPY breach of 100.00. Japanese importer demand was heavy at today's Tokyo fix and there was increased retail interest via the JPY crosses. The dollar pairing triggered a round of stops on the way up through 101.00, while EUR-JPY traded out of 131.00 to 131.85, but it took heavy lifting from specs largely due to EUR-USD, which struggled due to dollar strength. This was also the case for GBP, AUD and NZD after dollar strength triggered a broad based range break in several currency pairs. Yen weakness slowed a touch into the European open. USD-JPY met a wall of offers from 101.20 and there is talk of good outstanding 101.50 barriers, as well as resistance in front of this level. Buying interest is heavy from 100.80 to 100.60 and there are good bids from 100.30.[GBP, USD]
Cable is currently on the heavier side after the broad based dollar buying went through during Thursday's N.Y. session. This filled in several large orders between 1.5470 and 1.5430, leaving it close to 1.5420 in early Europe. Stale longs are likely to bail out of positions on a break of 1.5400, which has held since the better than expected GDP reading in April and then recent run of better U.K. data. Under 1.5400 there are support levels into 1.5370 that will encourage fresh long position building, but in the short term the downside is expected to attract.[USD, CHF]
EUR-CHF is well supported after the strong dollar bid lifted the cross above 1.2400, which coincided with the USD-CHF move up through 0.9500. European stocks are well supported in early trade as investors take encouragement from ongoing central bank stimulus and signs that economic activity may be picking up pace in some of the major developed economies. From a technical perspective EUR-CHF indicated signs of extending the upturn after 1.2310-15 gave way earlier in the week and the dollar upswing injected liquidity after 1.2350 broke. EUR-CHF longs are positioned for a break above 1.2450.[USD, CAD]
USD-CAD is closing in on 1.0100 on follow through dollar buying in Europe. Option related support and general dollar strength fueled a move up from 1.0020 during the North American afternoon session. Buy stops are under threat behind 1.0100 and larger buying will pick up if 1.0125-30 gives way. Bids are noted from 1.0070 and 1.0060.