2013-04-03 06:56 (UTC)
XE Market Analysis
The dollar maintained a firmer tone, while EUR and GBP continued to struggle as short term accounts keyed off economic fundamentals ahead of Thursday's key policy decisions from the BoJ, BoE and ECB. Equity markets did not provide a significant lead in Asia and were mixed overall despite yesterday's rally in Europe and the U.S. In Japan, investors positioned for BoJ policy easing, which has been well flagged by new BoJ Governor Kuroda. This weighed on JPY on Tuesday and fueled a Nikkei rally in excess of 2% today. Economic data was largely ignored, but there were further signs that China is recovering after the official services sector PMI rose to 55.6 in March from 54.3 in February amid a rise in construction. In Australia, a much better than expected trade deficit of A$178 mln was offset by a 5.3% m/m plunge in new private home sales.[EUR, USD]
EUR-USD headed lower during the Asian session and tested levels under 1.2800. After hitting 1.2795 lows it edged back over 1.2800 due to good support ahead of bids at 1.2770 to 1.2750. Weak eurozone data on Tuesday and the recent pick up in eurozone uncertainty has left downside risk in the near-term. There are increasing expectations that the ECB will eventually ease policy again and this is encouraged EUR supply on upticks. Offers are noted from the 1.2850 region and increase in size around the 200-dma at 1.2886.[USD, JPY]
USD-JPY remained on the front foot as the two-day BoJ meeting got underway. It is widely expected to ease policy, though Kuroda may start cautiously. His full five-year term still needs approval in the Diet and he may limit some of his options until a later date. Nevertheless, an increase in the amount of assets purchased and longer maturities has been well flagged ahead of tomorrow's decision. USD-JPY tested 93.30 in early trade and then edged up to 93.70 over the Asian afternoon session.[GBP, USD]
GBP has been on the backfoot since Tuesday after a leading U.S. name released a sell recommendation. Cable fell back from over 1.5200 to trade into the 1.5080 region in Asia after 1.5100 gave way. A large part of the Cable move has been a function of underlying dollar strength as short term account contine to focus on economic fundamentals. Cable may threaten support between 1.5075 and 1.5050 if construction PMI disappoints today.[USD, CHF]
CHF came under pressure on Tuesday as stocks recovered, which fueled a EUR-CHF move back over 1.2165 after it found a base at 1.2135. EUR-USD weakness provided the catalyst for a stop hunt under 1.2150, but stocks pushed ahead in Europe and prices steadied ahead of the N.Y. open. Dollar buying influenced out of N.Y. and USD-CHF is trading back above 0.9500. The near-term target for dollar bulls are recent highs around 0.9550 and then trend highs from mid-March around 0.9575.[USD, CAD]
USD-CAD found support into 1.0120 during Tuesday's North American session as a layer of corporate bids held the pairing up. Short covering since then lifted it back over 1.0155, though activity remained fairly muted. For now, USD-CAD is looking like a range trade, with offers placed around 1.0170-80 and into the 1.0200 region.