2013-01-25 11:37 (UTC)
XE Market Analysis
The EUR had a strong session amid a very robust German Ifo reading and the ECB's LTRO repayment announcement also came out on the higher side of expectations, which lifted EUR-USD up to the 1.3460 region. EUR-JPY carved out new trend highs close to 122.50 after a weak Japan CPI reading in Asia exacerbated yen weakenss and forced USD-JPY to new trend highs just shy of 91.00. GBP extended recent losses after U.K. Q4 GDP came in on the softer side of expectations, which forced Cable through 1.5750 and EUR-GBP moved over 0.8535. EUR-CHF remained choppy as EUR strength was offset by fund and corporate demand for CHF. In North America, U.S. has more corporate earnings to digest, yet only new homes sales is due for release. In Canada, CPI is expected to dip 0.2% in December.[EUR, USD]
EUR-USD jumped to 1.3460 session highs after ECB announced that 278 banks will repay EUR 137.2 bln of LTRO funds on January-30. The number was higher than the market median of EUR 100 bln, which fueled a kneejerk EUR rally. The EUR should continue to find support on dips, though has travelled a long way since Thursday's session, which could make a 1.3500 breach a push too far ahead of the weekend. Ahead of the release model funds and specs had already forced a move up through 1.3400 to 1.3451 highs amid expectations of a good outturn and a very strong German Ifo reading.[USD, JPY]
JPY losses were exacerbated by EUR-JPY gains since the European open. EUR strength boosted the cross from 121.00 in early Europe over 122.00. A plethora of corporate offers and option barriers were filled as intra-day accounts positioned for EUR upside into the German Ifo and ECB LTRO repayment announcement. USD-JPY was boosted from 90.50 up to 90.90 before a wall of offers related to large 91.00 barriers capped. In Asia, JPY weakened after soft Japan CPI reinforced Japan policy expectations. The negative CPI print allows policy makers to pin the more activist measures on deflation rather than directly attempting to weaken the yen despite accusations to the contrary from other global leaders. Japan have said that USD-JPY at Y95 or Y100 is no problem for the economy.[GBP, USD]
GBP slumped after U.K. Q4 GDP was weaker than expected. It came in at -0.3% q/q from +0.9% previously. Cable sank from 1.5815 through 1.5750 barriers and EUR-GBP added to earlier gains and traded over 0.8525. The cross had already breached 0.8500 ahead of the release on EUR strength following the German Ifo release. Cable movement was exacerbated to a degree by a blog that circulated speculation of a positive GDP outcome since late yesterday, which fueled short covering from 1.5760 to 1.5820 in early Europe. On an intra-day basis the market was probably more broadly balanced because of the speculation and this provided momentum to clear out Cable option barriers. European buyers supported Cable on dips once 1.5750 was breached.[USD, CHF]
EUR-CHF was capped after an early stop run. General EUR demand triggered model fund stops in early trade at 1.2440-50, but it ran into a very strong offer ahead of 1.2470. Since EUR-CHF corrected from 1.2570 to under 1.2350 it has struggled to sustain higher levels due to a pick up in corporate hedging. A USD-CHF move through the bottom of the recent range at 0.9270 exarcerbated the EUR-CHF pullback, along with a macro fund sell order. It tripped stops under 1.2400 ahead of the ECB LTRO result and then bounced from 1.2385 to 1.2435 on the release. Buyers are likely to return into 1.2370-80 and 1.2350.[USD, CAD]
USD-CAD has steepend its bid to trade into the 1.0035-40 area. Bids were seen at 1.0000-0.9990, which provided support on Thursday, but further gains may be slow due to option barriers at 1.0050, which will reportedly be defended until the Friday N.Y. options expiry. As a result, 1.0000-50 may define trade into the North American morning session.