2013-04-05 10:23 (UTC)
XE Market Analysis
There was more volatile trading in Asia as local traders reacted to yesterday's bold BoJ policy moves. In early trade USD-JPY rose sharply to reach new trend highs of 97.19, but corrected thereafter to sit just ahead of 96.00, where it remained for most of the European morning. The dollar remained weaker against EUR and GBP after yesterday's monetary policy decisions and after a jump in U.S. jobless claims added to a run of data misses ahead of today's NFP report. This was reflected in EUR-USD's two figure turnaround from new 2013 lows of 1.2745. However, there was no appetite in Europe to make a serious test to clear out further levels ahead of the psychological 1.3000 level. Cable also marked time ahead of 1.5200 option strikes and AUD-USD struggled just ahead of 1.0400 after it failed to break 1.0500 on Thursday.[EUR, USD]
EUR-USD traded a tight range following yesterday's short squeeze from new 2013 lows of 1.2745 to 1.2949. It traded quietly between 1.2900 and 1.2940 in Europe. A much stronger than expected rise in German factory orders fueled a pick up from the 1.2920 area, but overall there was limited interest to take on large positions ahead of the U.S. NFP release. Since the BoJ's bold policy moves there was speculation that Japanese investors were switching out of JGBs into eurozone bonds in the hunt for yield in late Asia and during today's European morning.[USD, JPY]
JPY backed up following a fall to fresh trend lows in early Asia. USD-JPY reached the 97.20 region before it pulled back to 95.85 lows by early Europe on profit taking by macro and leverage funds ahead of NFP data. Dip buying is prevalent though following the bold BoJ policy moves, while the escalation in Korean tensions is also a potential negative. Profit taking was also prevalent in other markets, with the Nikkei 225 closing 1.6% higher having rallied as much as 4.7% in early Asia, while the 10-year JGB hit 0.315% record lows then reversed to 0.62%. USD-JPY longs have placed close-to-market trailing stops through 95.70 and 95.50, while offers are noted from 96.80 to 97.20 ahead of outstanding barriers.[GBP, USD]
Cable is in a holding pattern just in front of 1.5200 after it met buyers after the earlier pullback from 1.5240 to 1.5200. After yesterday's sharp short squeeze from 1.5035 the short term picture is supportive. The topside bias is backed by option related support amid 1.5200 expiries and bids at the 10-dma at 1.5180. However, recent movement over 1.5250-60 has been labored due to outstanding offers from 1.5275 to 1.5300. Early on in the session Halifax house price data revealed a 0.2% m/m rise in March and 1.1% y/y. Meanwhile, the BoE's FPC said highly leveraged banks may need to hold more capital than the basic recommendations. Some members of the FPC felt that a 7% capital cushion may not be enough. It is considering tougher rules on how banks add up risks on their books. Elsewhere, BoE's Dale said it does not expect QE to have diminishing returns, but it will be more effective at some times than others. Dale felt the economy would have been in a far worse state without QE.[USD, CHF]
EUR-CHF is supportive ahead of 1.2150. For the most part EUR and USD flows have effectively left the cross net unchanged in the last 24 hours as prices chopped between 1.2135 and 1.2170. Dollar long profit taking was evident after the ECB press conference, along with another disappointing U.S. data release ahead of the NFP report. USD-CHF tumbled from 0.9527 highs, leaving stops intact just above and headed to lows of 0.9380 by Thursday's U.S. afternoon session. The pair backed up to 0.9430 since today's open as it corrected severely oversold levels, but it still looks vulnerable on the daily chart. For EUR-CHF, movement into 1.2170-80 is still a struggle due to an overhang of offers layered back towards 1.2200.[USD, CAD]
USD-CAD remained rangebound through the North American session on Thursday, holding firmly inside of 1.0120-70 since Monday. The pairing picked up following the firmer U.S. jobless claims, though activity remained muted into Friday's twin Canada/U.S. March employment reports. Bids were still seen in place at 1.0120-00, with offers noted from 1.0170.