2013-02-11 21:05 (UTC)
XE Market Analysis
FX trade was mostly calm in N.Y. trade on Monday, with perhaps the exception of a quick spike up in EUR-USD which was prompted by ECB's Weidmann, who said the "latest indicators don't signal a serious overvaluation of the euro despite its recent appreciation". EUR-USD moved from 1.3375 to highs over 1.3425. Elsewhere, major dollar pairings were range bound in relatively narrow and familiar trading bands. There was no U.S. data to move markets, while the risk backdrop was steady and fairly neutral overall.[EUR, USD]
EUR-USD spiked up from near 1.3375 to near 1.3425, as stops were tripped at 1.3400, and again at 1.3415 (over the previous NY high) following the Weidmann comments. He said "latest indicators don't signal a serious overvaluation of the euro despite its recent appreciation" adding that "politicians should hold on to the established division of labor" as "an exchange rate policy to specifically weaken the euro would lead to higher inflation in the end". Liquidity was lacking generally, which likely exacerbated the move up. EUR-USD has been choppy since London got underway, and it appears more of the same is in order for the N.Y. session.[USD, JPY]
The JPY consolidated European morning losses after USD-JPY ran into a wall of offers from 93.50, leaving it around 93.25-30. EUR-JPY also backed up and was trading under 125.00 after it topped out at 125.40 and is now taking its lead from EUR-USD movement. The EUR has started to come under a bit of selling pressure as the eurogroup meeting gets underway. There have been some EUR related comments, but so far only France is pushing for a more co-ordinated approach to stabilise forex levels. 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]
Cable reached 1.5670 lows after light stops were tripped just under 1.5680. The pair is now 130 pips lower from early European levels. Both sovereign names and short term macro accounts have been heavy sellers ahead of inflation data on Tuesday and the BoE's quarterly Inflation Report on Wednesday, where the growth outlook is widely expected to be downgraded. The market is gearing up for another test of trend line support around 1.5620-30, which held early last week. A close below that level this week would be a major bearish development for Cable and could result in more significant losses.[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 added to Friday's gains overnight, making its way over 1.0075 after closing around 1.0025. The moves largely mirrored the USD's mostly firmer stance overnight, though offers from 1.0075 slowed further upside momentum to just over 1.0080. Sellers were also seen into 1.0100, while stops should be a factor above the figure. The pairing pulled back to 1.0060 levels in very light afternoon trade.