2013-05-16 20:02 (UTC)
XE Market Analysis
The dollar was knocked lower following a series of soft U.S. economic releases. Initial jobless claims rose sharply, while CPI was softer in April. March housing starts collapsed, while the Philly Fed index turned negative in May. EUR-USD jumped to 1.2925 from near 1.2980, while USD-JPY fell under 102.90 before regaining some composure. Equity markets remained fairly flat after the data, perhaps as the weak reports spurred hopes for forgetting about Fed tapering. Aside from Michigan sentiment, and leading indicators, Friday's calendar is empty.[EUR, USD]
EUR-USD peaked over 1.2925, just under standing offers at 1.2930 after weak U.S. initial claims data, rallying from the 1.2880 region. The pairing pulled back under 1.2890 later, as the cutting of dollar longs ran its course following the earlier soft data. Equities remained in a tight range on either side of flat, and did not give much guidance to the FX market, though traders reported very light interest through the afternoon session.[USD, JPY]
USD-JPY opened the session near 102.50, though traded lower with each successive weak U.S. data release. The pairing eventually found a floor under 101.90, and spent the bulk of the session over 102.00 in a narrow range. Japanese corporate flows remained on both sides of the market, leaving the pair inside a 102.00-40 range for most of the session. Option barrier exposure from 103.00 is supplying the topside with significant offers and this is encouraging exporters and some funds to lock in current levels.[GBP, USD]
Cable touched 1.5300 as the dollar correction continued following the weak Philly Fed reading. Cable's downside should be underpinned into the weekend due to large outstanding option strikes at 1.5150. The market is long of strikes on the downside and option accounts have lifted Cable into 1.5200 and below in the last 24 hours. It is a quiet end to the week for GBP. There is no data to focus on, leaving the impetus on repositioning and the risk backdrop.[USD, CHF]
CHF made up ground over today's U.S. releases, leaving EUR-CHF relatively close to 1.2400 and USD-CHF nearly a full figure lower from European morning highs just in front of 0.9600. The rash of softer U.S. data was the catalyst for more corporate demand for CHF. Chart watchers are mindful that EUR-CHF was unable to sustain 1.2500 in January and long-term corporate hedging picked up since 1.2500 dealt on Tuesday. Specs that are playing CHF as a proxy for JPY should continue to buy dips, though movement back towards 1.2350 may reduce short term positioning.[USD, CAD]
USD-CAD briefly traded over 1.0200 into the North American open, making up ground from 1.0150 in Asia, where standing bids supported. The CAD continued to trade with a negative bias, though has been supported to a degree by positive risk levels, and prospects for U.S. outperformance on the growth front. Offers remain in place over 1.0200, with stops seen on either side of 1.0220. The pairing retraced back to 1.0150 through the morning session, as the USD came under broad fir after worse than expected U.S. data.