2013-05-20 07:19 (UTC)
XE Market Analysis
The dollar maintained its underlying trend, but selling into upticks featured over the course of the Asian afternoon as risk appetite fueled demand for EUR, GBP and the commodity bloc currencies on dips. JPY experienced a whippy session after Economy Minister Amari talked up JPY, which led to a deep sell-off from 103.20 to 102.00 at the Asia-Pacific open, although it backed up to 102.90 over the course of the Tokyo session. The Japanese government after its economic assessment after more data revealed that the recovery is picking up pace. Elsewhere, tension remained on the Korean Peninsula after North Korea fired short range missiles two days in a row, though the impact was mostly isolated to domestic markets in South Korea.[EUR, USD]
EUR-USD challenged 1.2800 in early trade amid EUR-JPY losses. However, the positive risk backdrop and natural demand for EUR on dips was the catalyst for a modest recovery. It managed to climb back to the 1.2850 area over the course of the session, leaving it largely unchanged from Friday's closing levels. The underlying trend is still skewed to further downside pressure, but EUR has not sustained movement under 1.2800 this year and into Wednesday's testimony from Bernanke there may be more interest to reduce speculative positions rather than add to current EUR shorts.[USD, JPY]
USD-JPY ended the Tokyo session on a stable footing close to 102.60, but had experienced whippy action early on in the session following comments from Economy Minister Amari. He said JPY strength was largely corrected and warned that further weakness could have a negative impact on people's lives. USD-JPY plunged from over 103.00 to 102.00, but when liquidity rose in Tokyo importers and real money were very heavy dollar buyers, which took it back to the 102.90 level. However, over the course of the Asian afternoon the comments reduced further yen weakness and consolidation set in. JPY should still run into selling pressure on upticks, but there are signs that policy makers may be happy with current levels and look for more stable prices rather than more increased yen selling from here.[GBP, USD]
Cable maintained a heavier tone as the underlying dollar trend left it close to the 1.5200 region. Light corrective action lifted it out of the 1.5160-70 area in Asia after 1.5150 held late last week. However, the technical backdrop is still encouraging good supply on upticks and the dollar is still being influenced by Fed policy tapering expectations. As a result, offers have been lowered to 1.5220 just over the 1.5250 area.[USD, CHF]
EUR-CHF is still supportive overall since it broke out of the medium term trading range around a month ago. Recent moves over 1.2500 have not been sustained due to increased corporate hedging and outstanding option barriers. However, the underlying trend is still favorable for short swissy positions and this has fueled EUR bids from 1.2450 back to 1.2400 initially. However, USD-CHF is stuggling over 0.9700 and given the build up of speculative positioning there may scope for some corrective action, particularly with Wednesday's testimony from Bernanke in the spotlight.[USD, CAD]
USD-CAD has pulled back from levels over 1.0300 as the commodity bloc currencies found a modicum of support in Asia on leverage account profit taking. However, CAD$ may still struggle through after the cool Canadian CPI data on Friday and the underlying heaviness in commodity prices. Bidding interest has underpinned from 1.0270 to 1.0250 and the near-term upside target is March March highs, just over 1.0340.