2013-05-17 10:57 (UTC)
XE Market Analysis
The main movers and shakers today were the commodity bloc currencies, which extended lower during both the Asian and European morning sessions. AUD-USD has logged a low of 0.9727, the lowest level seen since last Jun-4, and this is now the fifth consecutive day that the pair has exceeded its prior day's closing low. The 0.9700 provides the next target, while the 0.9581 low from last Jun-1 stands out on a longer dated chart. The NZD and CAD have also extended to fresh lows. EUR-USD was choppy within a narrow range, defined by its 1.2850 low and 1.2889 peak. USD-JPY trade was uneventful into the European open, contrasting to a further extension higher in Japanese stock markets following much stronger than expected machinery orders data (+14.2% m/m for 2.4% y/y versus the market expectation for -4.9% y/y).[EUR, USD]
EUR-USD was choppy within a narrow range, defined by its 1.2850 low and 1.2889 peak. The USD buying that was centered against the AUD, NZD and CAD bloc had served to bring the EUR-USD pair to its low point, though Mideast accounts reportedly bought euros around 1.2860, while there was talk that a big Asia account apparently has buying interest between 1.2840-50. Wednesday's low of 1.2843, which is the lowest point since April-4, provides technical support, and stops of the "sell" variety are reported under 1.2840. No data or fresh developments of note out came out of Europe. The threat that France may drive the eurozone's problems to a "higher plane," in the words of hedge fund manager Michael Hintze earlier this week, is according to one of our contacts at a major U.S. investment bank becoming more of a topic in markets.[USD, JPY]
USD-JPY trade was uneventful into the European open, contrasting to a further extension higher in Japanese stock markets following much stronger than expected machinery orders data (+14.2% m/m for 2.4% y/y versus the market expectation for -4.9% y/y). The Nikkei newspaper reported that the government will be announcing measures to boost leasing to revive capital spending to levels not seen since the collapse of Lehman Brothers in 2008. The more bullish economic narrative that's evolving seems to have taken the shine out of the yen-funded carry trade play. Option barrier exposure from 103.00 is supplying the topside with significant offers and this is encouraging exporters and some funds to lock in current levels. JPY-cross movement was limited overall due to consolidation in the dollar pairing and a general lack of movement in EUR-USD.[GBP, USD]
GBP-USD consolidated lower during the Asian and European morning sessions, now trading at 1.5245 bid, about 50 pips down on yesterday's London closing level. The downward bias has been imparted by USD gains versus the commodity bloc currencies today amid ongoing talk of Fed QE tapering. BoE MPC member Weale said earlier that inflation pressures have eased and that the growth outlook has improved, to little market impact however as this of course repeats the message of Wednesday's Inflation Report. Near-term resistance can be expected around 1.5275-80, support at 1.5225 and again at 1.5190-1.5200. EUR-GBP has held fairly steady, lifting from the 0.8330 area to levels around 0.8350-55. A sizeable option with a strike of 0.8400 is reportedly expiring at the NY cut today.[USD, CHF]
The Swiss currency gave back most of the gains it saw in the wake of the net-weak U.S. data releases on Thursday, which had inspired a bout of CHF-supportive risk aversion. A rebound in Asian equities, led once again by Japan, following much stronger than expected machinery orders helped revive animal spirits, which served to weight on the CHF. EUR-CHF recovered to the 1.2450, which is about the mid-way point of what is looking like an emerging consolidation pattern after peaking at 1.2525 on Wednesday. Chart watchers are mindful that EUR-CHF was unable to sustain 1.2500 in January and long-term corporate hedging reportedly picked while the cross was above 1.2500 this week.[USD, CAD]
USD-CAD extended higher Friday, making a three-week peak of 1.0229. The CAD is showing the same price action as its dollar commodity bloc relations, the AUD and NZD, which as a group have come under pressure amid talk of Fed taper of its QE program. April highs were logged between 1.0278-1.0294, and this zone provides both technical targets and resistance levels. Good support can now be expected at 1.0200-1.0190.