2013-01-03 19:46 (UTC)
XE Market Analysis
FX trade was very quiet in N.Y. on Thursday, though the dollar managed a small bump higher in morning trade, largely as risk appetite steadied after Wednesday's spike higher. On the data front, the ADP employment report for December came in better than expectations, though traders kept a low profile through the afternoon into Friday's official BLS jobs report. Weekly jobless claims were higher than forecasts, which offset sentiment to a degree, though there was little market reaction to the data. The markets are mindful of the problems still facing Congress in the U.S. in the coming weeks, and it appeared on Thursday, the relief rally following the fiscal cliff votes, had completely run its course. There was some action after the FOMC minutes were announced, which saw the dollar move uniformly higher. Voices in the Fed for halting QE before the end of 2013 appeared to have grown louder. EUR-USD fell to lows under 1.3065 from near 1.3110, while USD-JPY popped to 87.35 from 87.10.[EUR, USD]
EUR-USD tripped stops through 1.3090 early in N.Y., which cleared away good technical support. The N.Y. open saw a pick up in selling pressure, which suggested that U.S. accounts added to yesterday's positions, though follow through was not to be, as the pairing based at 1.3082 before turning modestly higher. Sellers were quick to return over 1.3110 however, indicating further downside may be in the cards once the market perhaps rests into Friday's U.S. jobs report.[USD, JPY]
USD-JPY ran into fund names at 86.75-80 lows, which limited the downturn. USD-JPY has experienced mixed leads from the crosses, but they have been influential since it topped out over 87.30 in the European morning. Good sales of EUR-JPY and GBP-JPY went through, though these have been negated by demand for AUD-JPY and CAD-JPY. USD-JPY longs are still looking overcooked on the daily chart and speculative positioning remains severely overstretched, but yen bears are unwilling to give up Japanese policy bets. On that front, Japan FinMin Aso said that "excessive yen strength is being corrected" but it remains important that the yen doesn't swing rapidly and it is his government's "utmost priority to fight deflation and will cooperate with the BoJ to achieve this goal." Since the election, USD-JPY broke out of its range around 82.0 and bolted as high as 87.34[GBP, USD]
Cable headed back towards 1.6200 after it met selling pressure from short term spec that keyed off a heavier equity market backdrop and short term technical, which encouraged dollar buying interest on dips. The sterling picture was dented a little by the poor construction PMI release, which came in at six month lows of 48.7. The latest BoE credit conditions survey suggested a pick up in lending in Q4, which will be welcomed, but triple dip recession risk is still a possibility. Cable followed the euro's path lower later in N.Y. trade, making session lows under 1.6140, in light trade. Buyers are reported ahead of stops under 1.6130. A break under 30 could see 1.6100 targeted initially, followed by last week's low under 1.6070.[USD, CHF]
USD-CHF pulled back from early highs around 0.9215 to trade at 0.9185 on Asian central bank selling, but dip buyers returned after it rebounded from under 0.9100 on Wednesday. It once again raised doubts over the lack of sustained downside pressure despite the bearish chart pattern and it is now trading at neutral levels. Later in N.Y., the pairing steadied on either side of 0.9225, before spiking up to near 0.9265 after the FOMC.[USD, CAD]
USD-CAD moved back toward Wednesday's highs, topping out near 0.9870 in early trade, as risk taking subsided following yesterday's sharp risk rally. Corporate bids under 0.9850 reportedly provided support in London trade, though fund offers were seen in place at 0.9880 to 0.9900. Buy stops should feature above the figure, but the pairing looked content to ply recent ranges, moving between 0.9845 and 0.9865 through the afternoon session.