2013-04-23 10:51 (UTC)
XE Market Analysis
The dollar and yen rallied after weak PMI data from China and Germany. The dollar started on the front foot and gained momentum after the German reading, which forced EUR from 1.3085 to 1.2973 lows amid increased expectations of an ECB rate cut. Cable fell in sympathy and threatened 1.5200, but it steadied after real money demand and EUR-GBP's heavier tone under 0.8550. JPY-cross selling pressure kept USD-JPY pressured around 98.60 after it fell from 99.30 overnight on fund repositioning following the lack of progress on 100.00 on Monday.[EUR, USD]
EUR-USD longs got caught offside as weak Germa PMI data weighed heavily. There was early buying interest out of 1.3040 to 1.3085 after an improvement in French PMI data, but it was offset by a below expectations German reading. Germany, which has carried the eurozone during the fiscal crisis, saw weak services and manufacturing data and was the first drop since November and reinforced ECB rate cut expectations. EUR-USD broke 1.3000 after it turned away from 1.3085. It extended to the 1.2975 region before sovereign bids returned, along with support related to outstanding option expiries at 1.3000 today.[USD, JPY]
USD-JPY struggled due to the weight of JPY-cross selling after weak PMI data from China and Germany. USD-JPY dropped from 99.30 in Asia and chopped between 98.53 and 98.90 since the European open. Fund names cut long positions after yesterday's failure to break 100.00. More range bound action could continue without a fresh lever for specs. This week sees considerable build up of option expiries at 100.00, with the majority roll off on Thursday, but Friday's BoJ policy outcome is not expected to offer anything new for market participants after it unveiling the new bond buying program on April-04.[GBP, USD]
Cable found buyers into 1.5200 after intra-day accounts headed for dollar safety after weak eurozone data. Real money names were touted around the lows and EUR-GBP's drop from 0.8565 to 0.8520 is supportive. However, the Cable recovery was still relatively shallow as short term accounts kept the pair offered from the 1.5230 region. There was barely any reaction from the weaker than expected U.K. CBI industrial trends survey. There was encouragement in the break down though, with optimism and industrial output the highest since April 2012. Industry is still waiting for a U.K. recovery, but it is slowing coming and won't change BoE rate expectations. Cable idles around 1.5220 after it briefly edged up to 1.5230. Further Cable movement under 1.5200 may be slow due to support around 1.5180-90 and a series of bids towards 1.5150 and 1.5125.[USD, CHF]
EUR-CHF maintained a supportive tone close to 1.2200 as EUR weakness is absorbed by USD strength after the weak PMI reading from Germany. EUR-CHF dipped briefly from 1.2205 to 1.2190 and then reclaimed 1.2200 after USD-CHF jumped from 0.9330 just above 0.9400, wich are its best levels since April-05. The dollar should lead movement ahead due to the risk-off tone, but EUR-CHF is also likely to come back under pressure. Even though EUR-CHF has maintained tight ranges flow reports from some banks suggest elevated demand for the CHF still. On Monday, SNB data revealed a rise in non-resident deposits at Swiss banks in January and February and lending by Swiss banks outside of Switzerland is still weak, which limits EUR-CHF's ability to rise.[USD, CAD]
USD-CAD is supportive after it firmed up overnight as risk appetite deteriorated. It headed into the 1.0280 area by early Europe after markets reacted to the China PMI release. The focus in Europe will come from eurozone PMI readings. Overall, the pairing remains firmly ensconced inside of familiar ranges though, with 1.0200-1.0300 holding for a week. Bids are reported from 1.0240 to 1.0230, and then into 1.0200, while offers are reported from 1.0280 to 1.300, making it more likely an uneventful CAD session may be in store.