2013-04-10 10:29 (UTC)
XE Market Analysis
It was a fairly quiet European morning. JPY selling generated some early interest for EUR, GBP and AUD as speculative names piled into the JPY crosses after an article in the Nikkei Daily suggested that lifers are likely to invest in overseas bonds due to BoJ policy. USD-JPY rallied out of 99.00 to the 99.50 as EUR, GBP and AUD carved out fresh trend highs versus the JPY. AUD also rallied on its own steam after China trade data overnight saw a marked pick up in imports, which bodes well for future demand for raw materials. However, export performance was disappointing and highlighted the disjointed activity across the global economy.[EUR, USD]
EUR-USD traded a tight range close to 1.3100 after it stalled just over 1.3120 during the European morning. It grinded through through offers up to 1.3120 after it gained positive traction from firmer equity markets and EUR-JPY strength. However, after moving just above 1.3120 it has met light offers from a supranational account ahead of March-08 highs of 1.3134. Option congestion at 1.3100, 1.3120 and 1.3150 should increase price congestion and movement slowed as a result despite the underlying trend, which is skewed to an eventual test on resistance at 1.3160-65. The impact from today's economic data releases was limited. French production numbers were better than expected, but Italian production missed expectations.[USD, JPY]
JPY selling picked up pace after the European open. USD-JPY rose from the 99.00 area and gainned momentum through 99.25 after heavy EUR-JPY demand went through to reach trend highs over 130.40. USD-JPY threatened 99.50, where good offers capped further gains. Traders of Asia FX are a bit nervy over a potential North Korean missile test after reports surfaced that North Korean gave Japanese vessels a warning for this afternoon. Adding traction to the move was a halt in JGB futures trading after PM Abe backed the BoJ policy stance in comments made to parliament overnight. Nikkei Daily said overnight that lifers could be crowded out of JGBs and may look to invest in foreign bonds due to the BoJ policy stance, which could weigh further on JPY. Japan's Kokusai Assets is the first lifer to come out and indicate that it has not changed its investment strategy currently, but it looks as if some specs and overseas money managers are front running a potential shift.[GBP, USD]
Cable is marking time above 1.5300 after yesterday's encouraging production numbers. NIESR also estimated that the economy grew 0.1% in March and revised up February's reading to 0.1%, which suggests that the U.K. will just avoid a triple-dip recession when official figures are released later this month. Longs target another test of resistance between 1.5350 and 1.5370, which would open up a potential run on 1.5400 and February-20 highs of 1.5448 in due course.[USD, CHF]
EUR-CHF has registered modest gains since the 200-dma held at 1.2130 at Monday's Asian open. Local names used this level to establish long positions and have been rewarded with a move back over 1.2200 on Tuesday. The better EUR tone has been a supportive lead, but since the cross move through 1.2200 an overhang of offers into 1.2220 capped gains. These good keep ranges tight as bids lower down are raised to 1.2175-80. USD-CHF is looking more vulnerable on further dollar selling and eyes a sustained move through 0.9300. Sell stops were tripped through 0.9300, but backed up a touch as buyers were noted ahead of short term support noted from as series of lows from late February at 0.9275-80.[USD, CAD]
USD-CAD steadied in front of 1.0150 after it recovered from yesterday's brief dip into 1.0135. Bids were reset from 1.0150 to 1.0135 and should keep the pair supportive in quiet trade. Offers remain heavy into the 1.0190-00 region, which suggests another session treading the familiar range.