2013-02-04 07:24 (UTC)
XE Market Analysis
Profit taking set in after the sharp JPY and USD losses late last week. Regional stocks were mostly higher, but both JPY and USD posted small gains amid a reduction in speculative positioning. The underlying tone was positive after Friday's firm U.S. data round. In Asia, China non-manfacturing PMI rose a notch to 56.2 in December to reach a five month high, which also helped sentiment. In Australia, data was softer. December building approvals slumped 4.4% m/m, ANZ job ads fell 0.9% m/m and TD-MI inflation eased to 2.4% y/y. However, most forecasts have RBA on hold this week. Meanwhile, Japan Finance Minister Aso defended the weaker yen, claiming it is result of policy rather than a goal for Japanese policy makers.[EUR, USD]
EUR-USD pulled back from just over 1.3650 to 1.3620 after it backed away from 1.3700 on Friday. Profit taking and a reduction in positioning was the main driver, though pullbacks remained supported by short term accounts. Buyers are tipped into 1.3600 and 1.3580, while on the topside there are offers that have been reset in front of 1.3700.[USD, JPY]
USD-JPY fell from early trend highs around 92.90 to the 92.50 region on option related offers and exporter sales. JPY edged higher despite equity market gains. This was largely a symptom of position adjustment rather than a change in the market tone. Comments from Japan Finance Minister Aso defended Japan's policy stance ahead of the G20, where currency may feature on the agenda after JPY has weakened around 20% since last October. It seems likely that JPY will meet selling pressure on upticks due to the Japan policy outlook, but into the meeting consolidation could set in. USD-JPY bids on an intra-day basis like at 92.40 and into 92.00-20, while barriers cap from 93.00.[GBP, USD]
Cable starts the week on a heavy footing after fund selling last week due to a poor economic outlook. It is expected to meet natural buying interest around 1.5700 and just below, but bias is firmly skewed to the downside. In the short-term, sell stops through 1.5650 may be a potential target. This week is an interesting week for BoE policy. The new BoE Governor Carney is expected to meet the Treasury Select Commitee and BoE members before he takes on the role on July 1st. The market believes Carney will present a dovish stance on policy and this should keep GBP on the backfoot.[USD, CHF]
EUR-CHF is underpinned after it met solid hedge fund demand in front of 1.2300 on Friday. There are expectation that funds will be the leading influence on the CHF now that month end has passed. The swissy saw a significant rise in corporate hedging and long-term interest from private clients. However, this was reportedly a seasonal influence rather than an indicator of a change in trend. EUR-CHF longs are still positioning for a sustained move on 1.2500 and above. USD-CHF should also meet very strong demand ahead of long-term support and option barriers from 0.9000.[USD, CAD]
USD-CAD is consolidative after it was unable to sustain Friday's move on parity. Movement has narrowed since it settled back into 0.9960-80. The technical backdrop is supportive, but solid offers at the figure should keep the upside contained and buyers are seen from 0.9970 to 0.9950.