2013-05-06 05:58 (UTC)
XE Market Analysis
Ranges were narrow due to today's market holidays in Japan and the U.K. Sentiment remained positive after Friday's upbeat U.S. payrolls report, though there were more negative economic data releases out of Asia. China April HSBC Services PMI slowed to 51.1 from 54.3, which were its weakest levels since the middle of 2011. In Australia, retail sales unexpectedly fell 0.4% in March and job ads dropped 1.3% m/m in April. EUR and GBP remained in a holding pattern close to 1.3100 and 1.5600, respectively, while AUD-USD eased from just shy of 1.0320 to the 1.0275 region. USD-JPY consolidated after Friday's surge from 98.00 to over 99.00, but should meet ongoing support after the rally in U.S. Treasury yields.[EUR, USD]
EUR-USD firmed up from 1.3120 to 1.3140 in early trade. However, further gains were hampered by Asian account selling and tentative interest to sell EUR-JPY into the 130.20 region. EUR-USD is expected to find buyers on dips following the decent rebound out of 1.3040 on Friday. Corporate hedging and reserve management flows have also been a big feature of the EUR in the last two weeks and should keep the pair stable despite recent economic data weakness.[USD, JPY]
USD-JPY consolidated after Friday's surge from the 98.00 region. Activity was very low in Asia due to the Tokyo holiday. There was early demand from specs as stocks headed higher, but profit taking in EUR-JPY limited gains ahead of Friday's 99.26 highs. Overall the pair was sidelined. However, we think there is scope for further gains this week after the pick up in U.S. jobs. U.S. Treasury yields are underpinned, while the BoJ's policy stance should encourage buyers and another test of 100.00 looks likely.[GBP, USD]
Cable was supported ahead at 1.5550-60 in Asia after it traded back over 1.5600 on Friday following heavy demand. There was a notable pick up in demand after real money and proprietary funds took advantage of a dip into 1.5480 after U.S. NFP data. GBP has been back in favor over the last week on improving forward looking economic data, which has reinforced recovery expectations. Near-term resistance at 1.5610 has fueling some decent two-way action recently, though the bias is firmly skewed to further upside. There are offers into 1.5630-40 and more option positions are likely into the mid-1.56 region and above.[USD, CHF]
EUR-CHF is trading back on the firmer side after last week's rebound out of 1.2200 back over 1.2250. USD-CHF demand was a significant factor in the upturn, while the EUR only experienced limited fall out from the ECB rate cut. Short term accounts were buoyed by central bank stimulus, which lifted stocks to multi-year highs and encouraged a jump in carry trade demand. EUR-CHF is now in territory where it has met decent supply in recent sessions. Offers lie from 1.2275-80 and into 1.2300. After it pulled back from 1.2349 on April-25 it has struggled to sustain movement over 1.2300.[USD, CAD]
USD-CAD consolidated after it fell to the 1.0075 region on Friday following the U.S. NFP data. Movement slowed around this levels and it chopped between 1.0070 and 1.0080 in Asia. The pick up in commodities and stocks should keep CAD$ elevated in the near-term. Nymex crude extended its rally towards $97 bbl after Israel bombed Syria on the weekend. Bids are still noted into the 1.0050 region, which are protecting good size sell stops below. USD-CAD has not traded for a sustained period into 1.0000 since the middle of February and both corporate names and option account will feature heavily on dips.