2013-04-17 06:33 (UTC)
XE Market Analysis
The dollar consolidated easier levels after Tuesday's Wall Street close gave positive guidance for Asian stocks, though China remained weak after Monday's data disappointment.This supported EUR and Cable, but AUD eased back into 1.0340 in the absence of other leads. JPY weakened as Japanese importers were good buyers of USD-JPY from 97.50 and it headed to 98.30. The move got traction from comments from IMF's Shinohara, who welcomed BoJ policy moves, but said they must be accompanied by fiscal and structural reforms. He did not think the recent JPY weakness constituted excessive volatility, adding that moves were a positive for the Japanese economy. Elsewhere, there were reports that U.S. Senator Wicker had received a poison letter, but it had no impact on sentiment. Goldman Sachs O'Neil also said gold prices have peaked and tipped further selling ahead.[EUR, USD]
EUR-USD maintained a supportive tone following the break higher after Tuesday's European close. However, it did not retest 1.3200 as good offers kept the topside in place from 1.3190 since the Asia Pacific open. Dip buying should continue in the near-term and there is positive momentum from EUR-JPY demand, while EUR-AUD is also on the front foot as AUD struggled due to the weak SSEC performance. EUR-USD buy stops are tipped through 1.3200 and a build up of offers are noted into 1.3225. Previous resistance at 1.3145-55 should now keep the downside supported in early Europe.[USD, JPY]
USD-JPY benefited after IMF backed BoJ policies, along with positive risk appetite. Importers absorbed early supply from offshore fund names and it turned away from 97.55 and made a steady move up through 98.00. Weak stops were flushed out and it extended through 98.30 offers at the Tokyo close. EUR-JPY rallied out of 128.50 over 129.50 and AUD-JPY hit 102.00, but AUD-USD heaviness capped further gains. Ahead of the weekend G20 meeting, upside momentum may be more contained. Another potential wild card is the Softbank Nextel bid, which could become a bid war after U.S. satellite TV provider Dish has offered to merge with Sprint Nextel. On the plus side, Softbank is long of USD-JPY around 82.20, though the $20 bln position is a potential risk for USD-JPY longs if it is forced to unwind.[GBP, USD]
Cable registered 1.5379 rally high during Tuesday's N.Y. session. However, it was unable to clear a wall of offers and reverted to lower levels in Asia as option related selling and EUR-GBP firmness fueled a move back into the 1.5330 region. Longs are still in play while a series of support levels hold from 1.5270 to 1.5240, but outstanding option expiries around 1.5300 and heavy selling from 1.5380 to 1.5400 could leave more range bound action.[USD, CHF]
CHF remains supportive as market participants are still a little cautious after the deep losses in risk markets on Monday. Tuesday's EUR rally helped EUR-CHF out of 1.2135 support, but upside movement remains limited around 1.2170, which has been the case since late last week. USD-CHF heaviness also weighed and it currently idles close to 0.9230 after U.S. trade saw it slide towards 0.9200 as a pick up in U.S. stocks weighed on the dollar overall.[USD, CAD]
USD-CAD did not retest Monday's highs around 1.0260 on Tuesday as an improved risk backdrop aided the CAD$. It headed into the 1.0200 region over the course of the session, though standing bids from 1.0200 have a put a floor in place and more buying is also tipped into stop loss territory from 1.0180. In Asia, it drifted back to 1.0235, though positioning will remain tight into the BoC policy decision. The Bank is expected to maintain its very mild tightening bias in Wednesday's announcement, as households continue to be reminded that rates will need to rise at some point. A steady 1.00% rate is also expected (median same), alongside a repetition of the view that "the considerable monetary policy stimulus currently in place will likely be required for a period of time."