2013-04-18 07:30 (UTC)
XE Market Analysis
The dollar and yen both maintained a supportive tone following Wednesday's broad equity market losses, which fueled risk aversion. However, EUR steadied in front of 1.3000 and USD-JPY stabilised close to the 98.00 area after more choppy trade. The G20 draft communique affirmed a commitment to avoid competitive devaluations, which was in line with expectations. JPY volatility was fueled after the Nikkei Daily said the latest BoJ outlook will forecast the 2% CPI target to be achieved as early as 2015. Meanwhile, weekly MoF flows data revealed that Japanese investors were actually net sellers of foreign bonds, while trade data saw a 1.1% y/y rebound in exports after February's 2.9% drop. Other data included China March FDI, which came in stronger than expected at 5.7% y/y.[EUR, USD]
EUR-USD started the session on the heavier side following yesterday's plunge towards 1.3000 amid the risk off tone and after remarks from ECB's Wiedmann, who suggested that ECB would cut rates if incoming data warranted. In Asia, EUR-JPY price chop was again a leading influence, which saw EUR-USD trade into 1.3020 from 1.3040 and then back to 1.3060. As European traders arrived the pair was net unchanged under 1.3050. The recent failure to sustain 1.3200 and Wednesday's plunge should see price action revert to the sell on rallies theme, with risk on support between 1.2970 and 1.2950.[USD, JPY]
USD-JPY and the JPY crosses experienced more choppy trade. Japanese buyers were evident in USD-JPY on dips and it headed back to 98.30, where supply related to the JPY crosses went through. EUR-JPY and AUD-JPY were weighed by MoF weekly flows data, which did not see the marked increase in foreign bond buying that many had anticipated. In fact, Japanese accounts were net sellers of foreigns bonds. EUR-JPY headed to 127.15 from the 128.00 area and AUD-JPY fell to 100.25 from over 101.00. USD-JPY was weighed on and tested the 97.65 area, but both the dollar pairing and the JPY crosses rebounded after dovish comments from BoJ's Miyao, who vowed that easy policy would continue. JPY movement slowed into the European open as market participants await comments from today's G20 in Washington. The draft statement carried by Bloomberg suggests it will be in a similar vein to the previous meeting and will call for avoidance of competitive currency devaluations, which is as-expected.[GBP, USD]
Cable has found a modicum of support after 1.5200 held during the N.Y. session. However, yesterday's break below 1.5250 points to a potential push through 1.5200 in the near-term. Today's U.K. retail sales could provide the catalyst for further losses, with a weak headline number expected. A build up of offers are tipped into 1.5270 and 1.5300. Sell stops are noted through 1.5200 and under support at 1.5180.[USD, CHF]
CHF remains supportive as markets remain cautious after this week's move out of risky positions. EUR-CHF marks time close to 1.2150 after the reversal in EUR-USD weighed, though this was offset to a degree by a USD-CHF rebound from 0.9210 to 0.9340 as risk aversion steepened. EUR-CHF looks likely to tread a relatively narrow range, with the focus coming from EUR and USD fluctuations. The dollar pairing has potential to push back beyond early April highs around 0.9370 as intra-day accounts look to buy the dollar on dips.[USD, CAD]
USD-CAD is trading at familiar levels close to 1.0250 after the BoC policy announcement failed to force a break of range. It remained short of Wednesday's highs of 1.0295 and drifted lower into the European open. There is light support from 1.0230 and then very little until the 1.0200 level, which has held the downside for several sessions. The hourly chart should support dip buying, but yesterday's failure to clear 1.0300 is likely to restrain momentum. Stops are said to be fairly large behind 1.0300 and through 1.0310.