2013-04-02 06:35 (UTC)
XE Market Analysis
The Asian market was defensive after yesterday's U.S. ISM miss, which weighed on equity markets in holiday thin trade. The dollar was a touch softer, but JPY rallied as fund names adjusted positions ahead of tomorrow's two-day BoJ policy meeting. AUD was steady after the RBA left rates unchanged at 3%, which was widely expected. The RBA maintained its easing bias, but was optimistic that rate cuts from 2011 and 2012 were starting to feed through to the economy. In China, sentiment was still impacted by last week's news that regulators will tighten lending controls.[EUR, USD]
EUR-USD was supported around 1.2850 after it benefited from yesterday's U.S. ISM miss. The turnaround in the EUR was more a function of short covering and dollar repositioning amid a combination of weaker U.S. data and after it was forced to trend lows close to 1.2750 in holiday thin trade. Upward momentum may be limited into the ECB's policy meeting later this week. The chances of further easing have increased after recent weakness in survey data and a deterioration in sentiment after the Cyprus debacle. We still expect the ECB to hold out for now, but open the door to further measures in May or June.[USD, JPY]
USD-JPY extended Monday's losses to reach 92.56 lows during the Asian afternoon amid reports of offshore fund selling. There was good Japanese demand on the way down, which kept the dollar pairing supported despite a decent stop hunt under 93.00. Ahead of tomorrow's BoJ meeting, Governor Kuroda, said all options were on the table to meet the 2% inflation target. Kuroda said its commitment to the target must be clear, adding that aggressive monetary policy was likely to leave the weaker JPY trend intact, but how much weakness would be dependent on prevailing economic conditions. He said it was the government's responsibility for maintaining FX stability and intervention and not the BoJ's.[GBP, USD]
GBP-USD drifted higher, in sympathy with the EUR-USD move and other dollar pairings. After trading up to 1.5260 in Asia it headed back to the 1.5225 region. Bigger picture, the pound looks to have entered a broad consolidation phase after hitting major trend lows toward 1.4800 earlier in the month. The BoE's recent verbal interventions and expectations for a gradual improvement in the U.K. economy through 2013 have settled bearish appetite. EUR-GBP hit a six-week low of 0.8416 on Monday and has broken below both the 20- and 50-day moving averages in recent sessions. Support is marked at 0.8400, while 0.8450 marks resistance.[USD, CHF]
USD-CHF consolidated lower, trading under 0.9450 after logging a two-week peak of 0.9553 last week. Good support is marked at 0.9400-05, with the 0.9400 level and its environs having proven to be a pivot level over the last month. We expect the pair to enter a broad consolidation in the coming weeks, during which period a further retreat seems likely, toward the 200-day moving average at 0.9416. EUR-CHF has continued to trade a steady path under 1.2200.[USD, CAD]
USD-CAD chopped around close to 1.0150 in Asia after it traded on an easier footing after the few sessions. The recent move under 1.0200 has left short term bias on lower levels. However, equity market weakness may limit the potential for a CAD$ rally. On an intra-day basis, bids at 1.0150 are protecting stops through 1.0145. On the topside, offers have been placed from 1.0190 to 1.0200.