2013-01-18 11:24 (UTC)
XE Market Analysis
JPY and CHF were the main movers in Europe as profit taking set in after more speculative fund and macro sell interest went through in Asia. USD-JPY extinguished large 90.00 option structures after Hamada, who is a key economic adviser to Abe, said USD-JPY at 95 or 100 is no problem for Japan. It reached 90.21 highs and then headed back to 89.70 in Europe. EUR-CHF hit trend highs around 1.2570 on more unwinding of short positions in Asia, but recoiled in Europe on heavy Swiss selling to 1.2455, where it steadied on talk that the Swiss government want the SNB to raise the EUR-CHF peg to 1.2500. Meanwhile, GBP added to recent losses after U.K. retail sales missed expectations, which forced Cable towards 1.5900 and EUR-GBP over 0.8380. Overnight, there was more encouraging data out of China, which saw China Q4 GDP beat expectations.[EUR, USD]
EUR-USD pulled back from 1.3400 after it was capped by a supranational bank, while fund profit taking in EUR-JPY and EUR-CHF also weighed and it registered a 1.3333 low. EUR is looking supportive on dips though and the daily chart points to an eventual push through 1.3400-10, where good size buy stops are widely noted. A large 1.3400 expiry could attract over the course of the session, but higher up we anticipate choppy action due to outstanding range binary positions at 1.3500. Industrial production date from Spain and Italy highlight that even though sentiment has improved in the eurozone the economic backdrop is still very challenging.[USD, JPY]
JPY gained on profit taking after the European open, but the Japanese policy outlook limited moves. USD-JPY was unable to trade higher than 90.15 since European trade got underway and headed to 89.68 pullback lows after very good fund selling pressure by EUR-JPY. The cross fell from 120.70 to 119.63 lows and then steadied close to 120.00. USD-JPY movement has slowed, but sources note very good real money bids into 89.50, 89.30 and 89.00. Japanese policy rhetoric continued overnight. Economic adviser Hamada grabbed the limelight after he said USD-JPY at 95 or 100 was no problem for Japan, which saw some bank research desks recalibrate USD-JPY outlooks, though near-term top pickers note 90.75 barriers in size that run until February.[GBP, USD]
Cable fell to intra-day lows under 1.5925 after weaker than expected U.K. retail sales. The move was relatively mild though, largely due to a build up of short positioning from intra-day accounts, as well as support in front of the 200-dma around 1.5910 today. Sterling continues to fair badly on persistent fund selling, which has been most pronounced against the EUR, which drove the cross over 0.8385 today. Cable has posted its biggest weekly drop since last July, while on trade weighted basis GBP is around nine month lows. Sterling has been weighed of late by rating downgrade risk, EU exit concerns and weak fundamentals.[USD, CHF]
EUR-CHF retraced the overnight rally on fund profit taking and corporate demand for swissy. The cross fell sharply from 1.2520 and forced out weak longs under 1.2500 to register intra-day lows around 1.2455, leaving it well below today's trend highs of 1.2568. The recoil in EUR-CHF mirrored corrective action across the JPY crosses, with repositioning underway after some of the sizeable moves this week. EUR-CHF price action look mobile though and one leading Swiss name has readjusted a long EUR-CHF trade to target 1.2750 from an intial target of 1.2550. We expect dip buying to continue, with barriers at 1.2575 and 1.2600 a target intra-day.[USD, CAD]
USD-CAD broke the top of the range to trade above 0.9900, which is its highest level since January-4. CAD$ got no benefit from China GDP data or a supportive backdrop in oil and stocks. Corporate hedging activity featured on the way up, along with a better technical backdrop after good support was noted into 0.9840-50 on Thursday. The break above the 10-dma and 21-dma suggest a further push higher and offers between 0.9925 and 0.9945 are in sight.