2013-05-14 10:35 (UTC)
XE Market Analysis
The dollar ended the European morning on a supportive footing, though had experienced fairly choppy action. EUR traded between 1.2985 and 1.3030 over the eurozone releases, which included a slightly disappointing German ZEW reading and better than expected eurozone industrial production. It was unable to sustain higher levels due to more semi-official sell interest, which left it close to 1.2975. Cable remained vulnerable after it met offers over 1.5300 throughout after Monday's late drop. Elsewhere, JPY was steady following USD-JPY's correction from over 102.00 on Monday and calming words on FX from Japan Economics Minister Amari. Meanwhile, AUD sank after the Australia federal budget saw a wider than expected deficit due to high AUD and lower commodity prices. SEK tumbled after an undershoot in Swedish CPI fueled Riksbank rate cut expectations.[EUR, USD]
EUR-USD found buyers out of the 1.2985 area to reach 1.3029 highs. Follow through demand was limited by good offers, while there was a semi-official interest on top of the market for the second consecutive session. Intra-day accounts playing the range left orders into the 1.3050 region, while support is noted into the 1.2970 region amid the lack of follow through selling under 1.2950 on Monday. N.Y. market participants will eye price action around 1.2950. A move below this level will quickly see 1.2930 support come into play.[USD, JPY]
USD-JPY maintained a heavier tone and edged out lows close to 101.25 since the Tokyo close. The correction in USD-JPY came on a mixture of repositioning by short term specs, option related flows and comments from Economics Minister Amari. After starting the session under 102.00 bias was skewed to the downside and there was no positive guidance from stocks, which also lost modest ground. Amari said it was important that currencies were not too volatile and the government will work to ensure FX rates trend calmly through various measures. USD-JPY support is noted into 101.00 and belows, but the road higher will be a more difficult one due to large option exposure from 102.50 and above, while the rise in JGB yields may also see lifers less inclined to diversify into overseas bonds.[GBP, USD]
Cable moved back across 1.5300 as it struggled to sustain altitude after Monday's late sell-off. A EUR-GBP squeeze higher and stops on Cable's downside reportedly drove the move. In recent months sterling has also reacted negatively to any EU referendum talk and yesterday's news that the Conservative Party will publish a draft Bill today to guarantee an in/out referendum on Europe before the end of 2017 may have encouraged losses. Sterling could find support on dips on news that Verizon Wireless will pay Vodafone a GBP 2.1 bln dividend payment in June and Severn Trent has received a bid from a consortium for GBP 5.3 bln and a decision will be made by June-11. Note, bids are tipped at 1.5275 and there is support at 1.5265.[USD, CHF]
EUR-CHF is steady close to the 1.2400. After a small correction from 1.2450-60 buyers have stepped back into the cross. The underlying tone is still skewed to higher levels after last week's break higher and it is possible that EUR-CHF will maintain a better tone until the next SNB meeting on June-21. Topside hedging has been prevalent and this has effectively put a short term bottom in place from 1.2300 as market participants eye an eventual push back on 1.2500.[USD, CAD]
USD-CAD recovered the 1.0000 handle and extended back to the 1.0130 area. A combination of increased dollar buying interest and the downturn in stocks weighed on the CAD$ tone. Offers are noted into 1.0140 and 1.0150, which could initially slow upside movement. Bids are likely to keep the downside in check from 1.0000 to 1.0080, though the equity market backdrop and risk will drive things intra-day.