2013-05-16 10:24 (UTC)
XE Market Analysis
The dollar remained supported in listless European trade. A lack of fresh impetus saw macro funds key off the U.S. outlook relative to Europe, which got positive resonance from technical studies on Wednesday after the USD-index broke longer term resistance. EUR traded a tight range close to 1.2850 and Cable was relatively stable in front of 1.5200, though both currencies struggled to sustain higher levels. AUD was a big mover from the European open as magnet stops through 0.9850 triggered deep losses to 0.9802 on rising risk that China will put the breaks on base metal demand due to overcapacity. USD-JPY flirted with recent highs around 102.75 as yen bears were encouraged after MoF weekly flow data revealed Japanese investors were net buyers of foreign bonds again. Meanwhile, CHF also saw more choppy action as speculative accounts ran into corporate hedging.[EUR, USD]
EUR-USD ranges tightened up close to 1.2850. The bias for EUR remains on the downside and an eventual push on 2013 lows just below 1.2750. However, EUR is meeting corporate demand on dips and there is still sporadic interest from sovereign names despite a marked push to hold dollars this week. There is a lot of order book support under 1.2850 today and more bids are noted into the 1.2800-20 area, which could absorb short term selling pressure. Note, expiry risk for EUR is also skewed to the topside today. Apart from strikes at 1.2810 most of the maturities are layered from 1.2875 to 1.2950.[USD, JPY]
USD-JPY headed back to the 102.50 region amid early dollar demand and more evidence of Japanese investors shifting money overseas. The latest MoF weekly flow data revealed more Japanese demand for overseas bonds and stocks, which reinforced the bearish yen outlook. Also supporting this theme were reports in the domestic press that Japanese banks have slashed JGB holdings and Dai-ichi Life could invest up to Y300 bln overseas. There is likely to be some positioning ahead of tomorrow's anticipated growth strategy announcement from Japan PM Abe. However, the USD-JPY upside should meet heavy dollar supply from the 102.70 region. Macro names, exporters and option interest is tipped ahead of well touted 103.00 barriers that mature tomorrow.[GBP, USD]
Cable is stable over 1.5200 after it rebounded from 1.5175 lows on Wednesday. Upward momentum is still being limited by dollar buyers since the USD index broke a long-term resistance level at 84.00 on Wednesday. However, the lack of sustained movement under 1.5200 today has offered encouragement for range traders and dip buying picked up. Under 1.5200 there are corporate backed bids and light sovereign flows, while a large 1.5150 option expiry is expected to keep the downside in check into Friday. Short term sellers are anticipated into 1.5255-60 and from 1.5280. Option maturities are noted either side of today's order flow at 1.5200 and 1.5290.[USD, CHF]
CHF is in the spotlight after heavy price chop over the last 24 hours. Corporate buying of CHF picked up sharply on yesterday's EUR-CHF move above 1.2500 and USD-CHF above 0.9700, which was the catalyst for the correction to 1.2420 and 0.9650, respectively. Speculative accounts were good EUR-CHF buyers after today's European open, which lifted EUR-CHF back to 1.2480 and USD-CHF found a bid back over 0.9700. There is conjecture that some specs are trading CHF as a proxy for JPY moves after several months of inactivity via EUR-CHF. There is a more sustained belief that EUR-CHF may see further topside moves as eurozone spreads narrow and SNB continue to back the current policy stance. Indeed, SNB's Zurbruegg maintained that the EUR-CHF 1.2000 floor is here to stay in comments earlier.[USD, CAD]
USD-CAD bottomed out ahead of 1.0150 after it pulled back from the 1.0220 region over the course of Wednesday's North American session. The downturn in USD-CAD was a function of dollar corrective action after U.S. data releases were mostly on the softer side. CAD$ backed up despite softer commodities and equity markets are also on the mixed side today. Dollar buyers are noted into 1.0135-40 behind 1.0150, while sellers are expected to use 1.0200 to fade upticks. Note, option strikes have changed hands over the next week between 1.0200 and 1.0230, which could see the upside attract.