2013-05-21 06:07 (UTC)
XE Market Analysis
The dollar was weighed by further repositioning head of Wednesday's testimony from Fed Chairman Bernanke. The dollar is perhaps due a slight correction after various proprietary models point to excessive long positions. JPY saw more selling pressure on upticks today after Japan Economy Minister Amari offered clarification on his FX positions after he appeared to call an end to yen selling on the weekend. Overnight, he called for FX markets to strike the balance between the impact on imports and exports and find stability at levels in line with economic fundamentals. He would not comment when asked whether the correction in yen strength is over, which fueled speculation that he may have been criticised privately for his previous comments. The RBA minutes did not offer any fresh leads for AUD. It said a subdued CPI outlook gave it scope to cut rates and it was appropriate to allow sustainable growth.[EUR, USD]
EUR-USD closed in on 1.2900 on corrective action as short term accounts cleaned up excessive positions after 1.2800 held on Monday. It is likely that more repositioning will go through as market participants turn towards Wednesday's testimony from Fed Chairman Bernanke. Recent CFTC positioning data was flagged as a potential risk as the value of dollar long positions hit 11-month highs of $32.27 bln in the week ended May-14, while net EUR shorts also rose 41% to a value of $7.6 bln. Also working against the EUR downside is also the lack of sustained movement under 1.2800 this year and EUR could gravitate to levels just over 1.2900. Note, on the 1.29 handle there is still very good resistance from 1.2945-50, which has held since last Wednesday.[USD, JPY]
USD-JPY met good demand on dips as the 102 handle held in early Asia. Japan's Economy Minister Amari appeared to backtrack on his weekend remarks, which encouraged yen selling on upticks. USD-JPY rebounded out of 102.00-10 to reach the 102.75 area. However, upward momentum ran out of steam due to good exporter offers and light profit taking. The BoJ's two-day policy meeting started today, but no change in policy is expected. Yen bears will want to see BoJ Governor Kuroda back up the current policy stance with more dovish rhetoric, though the intensity of yen selling may be more limited due to market positioning.[GBP, USD]
Cable is on a stable-to-firmer footing after it rebounded to 1.5280 during Monday's N.Y. afternoon on repositioning. A pick up in risk appetite and overstretched speculative positioning fueled a move up from 1.5165-70 area as large 1.5150 options put a floor in place. Upward momentum was still a little limited ahead of the 1.5300 level due to the underlying trend and broader dollar sentiment. However, the BoE minutes on Wednesday could reinforce GBP demand if there are less votes for further QE. There was speculation that BoE Governor King may have dropped his calls for QE after a more optimistic assessment on the U.K. outlook last week.[USD, CHF]
EUR-CHF was stable throughout Monday's session and should maintain its support overall. This has been the case since it broke out of the medium term trading range around a month ago. Recent moves over 1.2500 have not been sustained due to increased corporate hedging and outstanding option barriers. However, the underlying trend is still favorable for short swissy positions and this fueled EUR demand from 1.2450 and below, while there are bids lined up into 1.2400 and 1.2370-80. USD-CHF moves are being influenced by speculative positions and it has stuggled over 0.9700. We think there may scope for some corrective action, particularly with Wednesday's testimony from Bernanke in the spotlight and it could head back towards the 0.9600 region.[USD, CAD]
USD-CAD has corrected some of last Friday's gains, leaving it either side of 1.0250 after it failed to reclaim the 1.0300 level on Monday. The pick up in CAD$ reflected the improvement in the commodity market, which fueled profit taking via AUD and NZD by leverage funds. Dollar buyers were noted all the way down from 1.0270 to 1.0220, but importer demand for CAD$ provided reasonable liquidity despite a Canadian market holiday on Monday. Dollar longs are still targeting 2013 highs at 1.0343 from March-1, though there are resistance levels at 1.0320 and 1.0335 before it reaches the yearly high.