2013-01-28 11:20 (UTC)
XE Market Analysis
Consolidation set in after last week's strong moves. EUR was influenced by option exposure, with plain vanilla strikes at 1.3450 influencing after 1.3500 barriers held. USD-JPY backed away from 91.00 after it pulled back from trend highs just over 91.30 in early Asia-Pacific trade on exporter interest and gamma selling. GBP continued to experience fund selling, but prices settled down after EUR-GBP took out 0.8550 barriers, which knocked Cable towards 1.5715. Meanwhile, AUD and NZD continued to experience macro selling as long-term money heads back into the EUR. In the U.S. today durable goods, pending homes and the Dallas Fed index are due for release. It is a big week for the U.S., with the FOMC due, along with NFP data on Friday.[EUR, USD]
EUR-USD profit taking went through, which forced it from 1.3470 to 1.3425. Option related selling was evident around the highs due to large outstanding 1.3500 barriers and it filled in short term bids at 1.3430-40. Real money accounts are reportedly buying dips into 1.3430 and more orders are noted at 1.3400 and 1.3380, with longs positioning for a push over 1.3500. However, after the recent EUR strength there may be some sideways action. Option maturities in larger than average size could influence at 1.3450 if 1.3500 holds over the N.Y. open.[USD, JPY]
USD-JPY corrected after reaching trend highs just over 91.30 in Asia. The dollar pairing edged out lows just ahead of support at 90.50-55 after option related selling and exporter hedging went through overnight. Japanese policy rhetoric overnight was in line with recent sessions and did not add traction to yen selling. Some early EUR and GBP weakness weighed on the crosses, while AUD maintained a heavier tone after the correction late last week. Price action could remain choppy this week due to very large plain vanilla option exposure between 90.00 and 91.50. Option desks running excessive gamma exposure (long of strikes) are reportedly taking profit as spot is close to expiries.[GBP, USD]
GBP settled down after early weakness. Cable dropped from 1.5760 to 1.5715 after fund selling went through from the London open. Sell stops added momentum after last Friday's 1.5746 lows gave way. EUR-GBP broke to 0.8555 highs after specs fished for stops through 0.8550 barriers, but has since pulled back on EUR profit taking to trade net unchanged around 0.8535. Cable backed up as sovereign demand emerged ahead 1.5700 barriers. GBP has been under considerable pressure since the start of the year on triple dip recession risk, which increased after Q4 GDP missed expectations last Friday.[USD, CHF]
EUR-CHF moved briefly over 1.2500 in early Asia, but has pulled back to 1.2455 on profit taking activity. General EUR support on dips should keep the downside limited and buyers are noted into 1.2450 and 1.2400. SNB's Jordan said that the franc is still at high levels, but expected it to weaker further.[USD, CAD]
USD-CAD traded a tight range close to 1.0100 into the North American open, leaving it close to Friday's highs. Sellers are in place at the figure, though if these are filled in, stops will likely be a factor from 1.0110. The CAD has steadily eroded since the more dovish BoC announcement last Wednesday, while cooler CPI data weighed as well, though the break over the December high of 1.0057 gave traders another reason to buy USD-CAD. Buyers have placed bids at 1.0080 in Europe, while 1.0055-60 held in Asia.