2013-02-07 21:32 (UTC)
XE Market Analysis
The dollar and yen moved higher in N.Y. trade on Thursday, as the roller coaster of risk taking levels seen this week took another turn for the worse. The euro was driven by the ECB, where chief Draghi alluded to some potential policy sensitivity to the strength of the euro while saying that inflation risks in the region are contained and monetary policy would "remain accommodative." EUR-USD fell from 1.3550 to 1.3370 lows. USD-JPY meanwhile, slipped under 93.10 from over 93.70 on the softer risk landscape. On the economic front, Q4 productivity was weaker than forecast, while weekly jobless claims came in near expectations. Overnight, China export data could be of interest, while in the U.S. on Friday, the December trade report highlights the calendar.[EUR, USD]
EUR-USD triggered very large stops through 1.3450 as market participants digest comments on "accommodative policy" from ECB's Draghi. When asked about FX, Draghi said ECB is not doing the same as other countries, but reiterated once again that policy is accomodative. Buyers at the lows included a sovereign name and large European accounts, but the market was building for a stop hunt and large volumes changed hands. EUR-USD tested the 1.3400 level, though reportedly ran into Asian sovereign bids into the figure initially. The bounce though, was limited, and the pairing eventually tripped stops at 1.3390-80, on its way to 1.3370 lows. Afternoon short covering saw the euro move back to 1.3400, though it appears the unit has taken on a decidedly bearish tone.[USD, JPY]
USD-JPY was supported in London and edged up from 93.30 to 93.70 on Japanese demand, which boosted EUR-JPY from 126.00 over 126.80. There wasn't any reaction from the jump in Japan core machinery orders. The market has been more sensitive to weak data as it reinforces Japan policy risk, though U.S. trade saw dollar-yen ease back to 93.10 on the back of the weaker risk backdrop. Sell stops were tripped at 93.30 from weak longs, though Japanese demand returned ahead of 93.00.[GBP, USD]
Cable was supported just under 1.5700 by EUR-GBP losses. It fell from 0.8600 at the start of the ECB press conference and moved through 0.8540 as EUR-USD tested 1.3400. Cable consolidated since Carney's testimony to the TSC and the unchanged BoE policy outcome. After a brief squeeze from 1.5675 to 1.5770 it headed back to just under 1.5700. There was no reaction from the latest NIESR U.K. GDP estimate, which came in flat in the three months to January, yet still an improvement from December's -0.3% outturn. From a technical pespective, Cable is showing signs of stability since it corrected oversold levels following yesterday's failure to break 1.5630.[USD, CHF]
EUR-CHF bumped against support into 1.2300 and below in Asia, but has struggled to sustain an early move higher. It received a fillip from early Swiss buyers up to 1.2330-35 as a big jump in Swiss consumer confidence was a positive for risk appetite in the region. However, the EUR-CHF upside was hampered by USD-CHF heaviness. It was weighed by early fund selling after it was unable to sustain a move on 0.9150 yesterday and pulled back to 0.9065 today. However, the downside was supported in N.Y., as general dollar strength ensued on the back of soft risk sentiment. The dollar pairing flirted with 0.9200 in afternoon dealings.[USD, CAD]
USD-CAD moved up to 0.9975 in morning trade, after basing at 0.9934 in London. Sell stops under 0.9945-40 were tripped, though another band of standing bids at 0.9930 reportedly stopped the declines. The slipping risk backdrop resulted in morning gains, with the pairing grinding its way through offers from 0.9990, managing highs of just 0.9994. Heavier offers were reported into 1.0000, and with risk appetite fairly steady, albeit at lowered levels, there was not be enough impetus to push parity today. Stops are still seen at 1.0010, though will likely remain save into Friday's Canadian employment report.