2013-03-14 07:53 (UTC)
XE Market Analysis
The dollar consolidated Wednesday's gains, which came after more U.S. data strength. EUR trades in close proximity to 1.2950 after the downside was supported by option bids ahead of 1.2900 barriers. Yesterday's weak eurozone data compounded the EUR woes and will keep expectations elevated for more central bank action. GBP is holding up as U.K. corporate flows and hedging activity keeps Cable underpinned ahead of 1.4900, while EUR-GBP is heavier under 0.8700 following EUR losses. JPY experienced a mixed overnight session, but the balance of risk is on the downside into tomorrow's upper house vote for the BoJ nominees. All three candidates successfully passed the lower house vote, which will fuel expectations of more BoJ stimulus by early April. Elsewhere, the SNB should keep policy unchanged and maintain its currency peg. Local names are already positioning for CHF losses, which helped EUR-CHF over 1.2360 from 1.2335 in Asia.[EUR, USD]
EUR-USD found support on dips after it posted new trend lows of 1.2923 on Wednesday. The pairing may now eye December lows near 1.2880, though bidding interest is seen at 1.2920-00, and could well provide interim support due to outstanding 1.2900 barriers. In Europe, there is ECB speak to focus on, but it should fall in line with last week's policy meeting, though yesterday's weak eurozone data has elevated hopes that ECB will be eventually forced to cut rates.[USD, JPY]
USD-JPY was supported under 96.00 overnight by large Japanese bids and there was also encouragement for the policy outlook after the lower house approved the BoJ nominees ahead of tomorrow's upper house vote. The timing of the BoJ leadership vote has seen a drop in the usual seasonal repatriation flows, but these could pick up early next week. On the topside, exporter offers are widely noted from 96.30-40 and over 96.50, where it topped out on Monday.[GBP, USD]
GBP is still being supported by short covering following Tuesday's drop to new trend lows. The market is still excessively short GBP and the more stable tone is a function of short term repositioning rather than a shift in core positions. Option expiries at 1.4925 were an influence yesterday and more roll-off today in large size, along with very large plain vanilla interest at 1.4950 for Friday, which could effectively tie ranges up into the weekend. GBP has also benefited from heavy corporate demand and hedging by U.K. pension funds. However, the underlying trend should fuel offers towards 1.5000.[USD, CHF]
EUR-CHF firmed up from 1.2335 over 1.2360 as local names position ahead of the SNB policy decision, where an unchanged stance is widely expected. The Bank should maintain its commitment to the currency peg and cite eurozone risks, which may encourage follow through swissy selling. The cross is skewed towards a test of offers from the 1.2370-80 area, while USD-CHF is supported and eyes a clean break through 0.9550.[USD, CAD]
USD-CAD turned away from the bottom of its recent range amid broad dollar strength and the overnight dip in equity markets. Bid interest was prevalent into 1.0240-45 and protected sell stops below and it headed back to the 1.0280 area. Movement is influenced by short term range players and this theme looks likely to continue while stops are intact either side of 1.0240 and 1.0300.