2013-05-28 18:59 (UTC)
XE Market Analysis
The dollar firmed broadly in N.Y. dealings on Tuesday, with the U.S. market returning after a long weekend to find an improved risk backdrop. The greenback has being reacting positively to better data, highlighted by today's improved May consumer confidence reading. Wall Street rallied sharply higher, as commodity prices improved. EUR-USD dropped to 1.2850 from near 1.2950 at the open, while USD-JPY touched 102.50 after flirting with 102.00 in early trade. Wednesday's U.S. calendar is about empty, though the BoC announcement North of the border will be of interest.[EUR, USD]
EUR-USD losses accelerated as stops gave way behind 1.2880 to reach intra-day lows close to 1.2860. The pairing later eased to session lows near 1.2850, with traders eying May 23 lows near 1.2820 as initial support. There was some talk of Mideast sovereign buying interest at the lows, which seemed to have put a temporary floor in place. Two-way interest is noted from 1.2800 to 1.2820, though stops are seen building from 1.2790 now.[USD, JPY]
USD-JPY movement slowed up due to large 102.00 expiries. Overall, it held on to a firmer bias today following large overnight dollar demand from Japanese importers and retail demand via the JPY-crosses. Between 102.10 and 102.30 it has met frequent selling from exporters, though managed a high near 102.50 into the London close before easing back under 102.20. Our Japanese sources told us last week that exporters may increase hedging activity for fear of missing out on current levels after the pace of last week's downturn in USD-JPY threatened to leave many unhedged.[GBP, USD]
Cable was boosted by fund demand ahead of the N.Y. open, which tripped short term stops at 1.5125. Follow through demand from London interbank names carried it to 1.5135, but momentum waned as option related flows kicked in. Outstanding 1.5100 option strike restricted action since the London session opened and the pairing remained steady until after the 10:00 EDT options cut. From there, cable slid back under 1.5040, in concert with the greenback's general strength.[USD, CHF]
The CHF eased up as stocks headed higher. EUR-CHF traded above 1.2500 versus 1.2485 at the European open after it found buyers ahead of 1.2400 in thin trade on Monday. The move out of swissy long positions, combined with underlying dollar strength, lifted USD-CHF back to the 0.9750 region compared with 0.9600 on Monday. EUR-CHF movement is mainly influenced by speculative accounts, while USD strength is coming from macro fundamentals. Last week, CHF was one of the beneficiaries of last week's meltdown on the Japanese stock market as real money names piled back into safety plays. However, we think these type of accounts will wait for a few more sessions before reducing positions aggressively.[USD, CAD]
USD-CAD found good support under 1.0330, with a larger U.S. name seen with buying interest. In addition, CTA bids were reported on the way down in early N.Y. trade. The pairing moved back over 1.0350, . USD-CAD stayed firm into the London close, with the loonie coming under some defensive pressure ahead of Wednesday's BoC policy announcement, where there has been speculation the Bank could drop its long in the tooth tightening bias. Time will tell, though USD-CAD short covering may continue overnight. The pairing pulled up to 1.0395 in afternoon trade, threatening barriers at the figure, and stops from 1.0420.