2013-03-26 21:10 (UTC)
XE Market Analysis
FX trade was relatively tame on Tuesday in N.Y., and aside from a couple of Cyprus related euro wiggles, the dollar and yen were softer overall. Risk taking improved, aiding Wall Street and commodities, while U.S. data overall was mixed. Durable orders beat the street, though consumer confidence was much weaker than expected, and new home sales slightly missed the mark. The data generally had little impact on the dollar. Fitch put Cyprus on rating watch negative (!?!?) which was shrugged off, though earlier, EUR-USD posted intra day highs of 1.2888 after testing trend lows. Reports that the Cyprus bail-in would not be a template for further crisis appeared to help euro sentiment slightly, if only briefly. Elsewhere, USD-JPY rallied over 94.60 on improved risk taking, while the dollar bloc improved, and cable steadied near 1.5150.[EUR, USD]
European parliament will push for depositors above EUR 100k to face a bail-in under a new bank resolution law, according to an EU lawmaker. In theory this should not be a surprise, as under the current EU deposit guarantee only those up to 100K are secured. However, the bail-ins for depositors are a sore point, just 24 hours after eurogroup Dijsselbloem's was forced to retract his unhelpful remarks on the Cyprus deal being a potential blue print for future bailouts. Officials already insisted on invstor participation in the Greek bailout and Cyprus had made clear that the focus in future rescues will be less and less on tax payers and more on investors, but now also depositors. EUR revisited yesterday's lows under 1.2830, but snapped back on option backed support ahead of 1.2825 barriers. There was also speculation of quarter end demand tipped for today's London fix. EUR-USD posted intra day highs of 1.2888 after testing trend lows not long before that. Reports that the Cyprus bail-in would not be a template for further crisis appeared to have helped euro sentiment slightly, while Wall Street has moved to session highs as well. EUR-USD offers are noted into 1.2900, though some weak stops may be in play above the figure.[USD, JPY]
USD-JPY drifted back to 94.00 in Europe after it was unable to overcome exporter offers from 94.50 overnight, and as further JPY cross weakness went through after the European open. The cross and the dollar pairing recovered some in N.Y. trade, with USD-JPY touching 94.60, and EUR-JPY moving back to 121.60. The better risk backdrop weighed on the yen, though exporter dollar offers over 94.50 may slow gains through the Asian session.[GBP, USD]
Cable hit 1.5135 lows, leaving it just over 0.4% lower since the London open. U.S. fund interest was tipped today amid speculation of demand related to quarter end and short term accounts also reestablished downside bets after failure to sustain a move over 1.5200. The daily chart is still bullish, but a close under 1.5150 could tip the balance to lower levels. Tomorrow's focus in the final reading of Q4 GDP, which is expected to be confirmed at -0.3% q/q. The U.K. press cited rising risk of a triple dip recession in Q1 due to the coldest March for nearly 50 years.[USD, CHF]
EUR-CHF is stuck at 1.2200 after it was unable to sustain higher levels on Monday. A knee-jerk rally over 1.2250 after the Cyprus deal was struck proved to be shortlived and it headed back 1.2190 on broad EUR losses. USD-CHF's move towards 0.9500 on safe haven activity enabled the cross to steady and it is tied just in front of 1.2200 today. EUR and USD fluctuations will leave the cross rangebound in the near-term, along with outstanding 1.2200 option expiries. Since eurozone uncertainty picked up over the last week CHF has been supported against the EUR. However, SNB board members have warned that it will still contemplate other measures to offset increased swissy inflows and maintain the cap at 1.2000.[USD, CAD]
USD-CAD stayed in a narrow range on either side of 1.0200 overnight, held inside of 1.0210 and 1.0190 during London morning hours. The uncertainty that still surrounds Cyprus may have the pairing in a holding pattern for now, and dealers largely report mixed interest this morning, and fairly balanced order books, with bids in place at 1.0180 and offers from 1.0230. USD-CAD later touched lows near 1.0165, after sliding through the 1.0180 level, where buyers had been reported, but ultimately did not materialize. More bids are now noted at 1.0150, though it appeared short covering interest stepped in ahead of there, taking USD-CAD back over 1.0180.