2013-05-15 19:32 (UTC)
XE Market Analysis
The dollar moved back toward session highs versus most major currencies in N.Y. afternoon trade on Wednesday, after stumbling in the aftermath of the softer PPI, Empire State Index, and industrial production data early in the session. Stocks rebounded, and as had been the case earlier in the week, firmer equities seemed to be supporting the dollar. The soft Q1 EU GDP data released ahead of the session appeared to have highlighted how much better a position the U.S. is in from a growth standpoint. This could well support the greenback further in the coming days and weeks. Thursday's U.S. calendar includes April CPI, April housing starts, and weekly jobless claims.[EUR, USD]
EUR-USD traded into the 1.2850 region, where option barriers were tipped earlier in the session. The EUR-USD move lower accelerated into the N.Y. open after the USD index broke through up through long-term resistance at 84.00. Macro funds are positioned for further EUR-USD weakness amid the contrasting growth stories in the eurozone and the U.S. The move on to the 1.28 handle should draw in more sellers that are looking towards early April lows behind 1.2800 barriers. There are some European corporates that are entering the market at current levels, but for the most part the broader dollar move is driving price action at the moment.[USD, JPY]
USD-JPY losses were contained to just under 102.00, after the pairing had fallen from near 102.75 into the weak U.S. data early in the session. Bids in place from 102.00 to 101.80 put a floor under the dollar, which recovered later over 102.50. Significant offers are not seen now until 102.80, and we look for two-way action to prevail between 102.00 and 102.50 for the time being. USD-JPY options could fuel more price chop into Friday. Several barriers are rolling off at 103.00 and large short dated interest has changed hands for Friday's N.Y. cut. Short term accounts are positioning for further upside into PM Abe's growth strategy announcement, but 103.00 reverse knock out positions are expected to be well defended.[GBP, USD]
Cable rebounded from 1.5175 lows after good sell interest went through into the ECB fix. Once filled, Cable managed to reclaim 1.5200 and pushed recovery highs of 1.5263 after the U.S. data. Upward momentum is still being limited by dollar buyers out of N.Y. since the USD index broke a long-term resistance level during the European morning. Cable bids under 1.5200 were noted from corporate names, while Asian sovereign was also active.[USD, CHF]
USD-CHF strength buoyed EUR-CHF. The dollar pairing was boosted from 0.9650 in early Europe to trade up through option barriers at 0.9700, to a peak near 0.9750, which fueled EUR-CHF buyers from 1.2470 to 1.2525. The cross was supportive immediately from the European open after it traded over 1.2500 for the first time since late January after Tuesday's European close, which follows a period of more pronounced swissy weakness. Some market participants are starting to consider whether SNB could be forced to do more in its bid to overcome deflation and this has kept the cross supported since it cleared 1.2300 in late April. It is possible that EUR-CHF will maintain firmer levels now until the next SNB meeting on June-21. EUR-CHF longs target the previous peak at 1.2573, while USD-CHF is skewed to a run on 0.9970-1.0000.[USD, CAD]
USD-CAD breached the 1.0200 level early in the North American session, peaking just shy of 1.0220. Softer Canadian manufacturing data had little impact on the loonie, as USD-CAD slipped back under 1.0170 later in the session. Option backed offers parked at 1.0230 stopped the rally, and some profit taking was seen, particularly from European names.