2013-02-11 11:43 (UTC)
XE Market Analysis
The European morning was influenced by macro funds and speculative positioning ahead of key event risks this week, which kicks off with today's eurogroup meeting and ends the week with the G20. Currencies are expected to feature on the agenda as the recent yen weakening sharpened the focus on competitive devaluation. The G7 are reportedly discussing a statement on currencies before the G20, though this did not stop JPY from weakening today, which drove USD-JPY up from 92.50 to 93.40 in the European morning. EUR still struggled to sustain higher levels after last week's sharp correction from 1.3600. GBP came under heavy selling pressure amid reports that the BoE will downgrade the growth outlook this week.[EUR, USD]
EUR-USD found support from the 1.3350-60 region in early Europe and tested levels just over 1.3400 amid EUR-JPY demand. Buyers of EUR-USD were mainly short term accounts. The usual sovereign influence was much lighter due to today's holidays in Asia. A U.S. name forced an early stops hunt to 1.3325 lows after the Asia open. It has been underpinned though from day traders and short term accounts playing the range. However, it is still looking limited on the topside since Draghi's focus on EUR appreciation last week and the potential impact on CPI. Option expiries at 1.3400 exerted an influence and there are also maturities at 1.3325.[USD, JPY]
JPY weakened from the European open, which lifted USD-JPY from 92.50 to 93.40, while EUR-JPY traded out of 123.70 just over 125.00. European sources tipped comments from Japan's Amari and ADB chief Kuroda. EconMin Amari said the Japanese government will continue its efforts to drive the Nikkei 225 to 13,000 by the end of the fiscal year on March-31. Kuroda , who is a candidate for the BoJ Governor role, said additional easing can by justified for 2013 and it can meet its 2% inflation target in two-years. JPY is still expected to meet selling pressure on upticks, but into the G20 there may be more limited action. The WSJ said that G7 officials are expected to make comments in the coming days, even if they haven't agreed on a joint statement.[GBP, USD]
GBP fell sharply after the European open. Cable lost a full big figure from 1.5810 to print lows of 1.5703, while EUR-GBP firmed up from 0.8465 to 0.8525. A sovereign names has been widely tipped in Cable on the way down, though short term macro funds and specs were sellers immediately from the open after weekend press reports suggest that the BoE will downgrade the growth outlook this week. Sell stops featured in Cable through 1.5750 and intra-day accounts are positioning for a test of recent support at 1.5675 ahead of bids between 1.5650 and 1.5630, where very large support is noted. EUR-GBP is closing in on offers from 0.8525 to 0.8540.[USD, CHF]
EUR-CHF is tracking EUR-USD movement in choppy trade. The market is relatively thin after several centers were closed in Asia, while in Europe market participants await the eurogroup meeting, where more currency rhetoric may hit the wires. EUR traded lower initally, with early European accounts keying off short term technical indicators, which forced EUR-CHF to 1.2260. Good standing bids fueled a move back to 1.2285, leaving it little changed on an intra-day basis. USD-CHF has also chopped between 0.9165 and 0.9185, though dollar safety is keeping the pair underpinned. However, sources continue to tip swissy demand on dips, perhaps as political uncertainty in the eurozone reduces appetite for speculative positioning. Meanwhile, there was little reaction to comments from SNB's Zurbruegg, who said the franc still remains strong and uncertainty over the eurozone still makes the currency cap necessary. He said the SNB was ready to take additional measures if necessary.[USD, CAD]
USD-CAD has extended to 1.0070 after Friday's modest rally, which came on the back of a plunge in Canadian employment. Housing starts also dropped and the narrower trade deficit was influenced by a fall in exports. Overall, the data mix supported the BoC policy stance and with the dollar in better shape it provided the momentum for higher levels. Offers up to 1.0050 have been cleared away, leaving the focus on 1.0070-80 and 1.0100, while it appears the 1.0000 level is now interim support.