2013-05-22 06:29 (UTC)
XE Market Analysis
The dollar traded on the easier side after dovish Fedspeak from Bullard and Dudley on Tuesday dampened the debate on Fed tapering. EUR benefited the most and broke over 1.2900 to 1.2940 by early Asia. Other moves were more restrained. USD-JPY was choppy relatively close to 102.50 as market participants digested the BoJ's steady policy hand, which was widely expected. There was nothing new in the statement, which limited FX moves, but the Nikkei posted healthy gains after the BoJ upgraded the economy. AUD tumbled from 0.9825 to settle back into 0.9770 after the Westpac/MI consumer confidence index slumped 7% to 97.6.[EUR, USD]
EUR-USD started the session just ahead of 1.2900 and headed to 1.2940 amid reports of good demand for the EUR-crosses. EUR-GBP continued to find buyers following yesterday's weaker than expected U.K. CPI and PPI data, which reinforced the bid tone, leaving it around 0.8530. EUR-AUD was underpinned ahead of 1.3200 as general AUD weakness fueled a run up from 1.3150. EUR-USD saw fairly frequent buying from macro types and short term intra-day accounts, but it still struggled to clear decent resistance from 1.2945, which eventually fueled profit taking and it entered the European open net unchanged. The balance of risk may be higher intra-day now that 1.2900 has given way and of course underlying market positioning supports this view. Market participants may now gamble that Bernanke will also balance the recent debate on tapering with dovish rhetoric of his own.[USD, JPY]
USD-JPY traded a fairly range close to 102.50. Japanese buyers were noted on dips, while offshore names capped into the 102.60-65 area. The BoJ was largely uneventful for FX market participants. It left policy unchanged as expected and upped its economic assessment. It noted exports and capital expenditure had bottomed out and private demand was also up. Data included a wider than expected trade deficit as exports were a bit weaker than expected at 3.8% y/y, but imports came in on the strong side at 9.4% y/y. The JPY crosses tended to see more flows. EUR-JPY and GBP-JPY were higher, with stocks still on the front foot and the respective gains in the dollar majors. AUD-JPY was weighed due to underlying weakness in AUD-USD.[GBP, USD]
Cable edged back into the 1.5150 region as the dollar weakened after dovish Fedspeak on Tuesday, which fueled dollar repositioning ahead of today's testimony from Fed Chairman Bernanke. GBP is still underperforming to a degree though, following yesterday's weaker than expected U.K. CPI reading, which knocked Cable from over 1.5250 to 1.5113 lows. The GBP sell-off fueled good EUR-GBP demand and the cross steepened its bid overnight to reach the 0.8530 region. The focus for sterling markets today will come from the BoE minutes and there is also U.K. retail sales and the CBI industrial trends survey to digest. It seems more likely that BoE minutes will take into account the improvement in the U.K. economy, while data is also expected to firm up, which may encourage some GBP short covering.[USD, CHF]
EUR-CHF has consolidated Tuesday's move over 1.2500 and made the first close over this level since January, which is an early positive for long positions. One of the major influences on EUR-CHF is the USD-CHF upswing, which extendeded to the 0.9750 region. However, given the dovish Fedspeak on Tuesday and the potential for more balanced rhetoric from Bernanke today he dollar may see limited upside from here in the short term. EUR-CHF may gravitate to higher levels based on EUR firmness, but outstanding option barriers from 1.2550 should encourage protective offers.[USD, CAD]
USD-CAD corrected from 1.0320 back to the 1.0250 region as longs got stopped out on yesterday's surprisingly dovish Fedspeak. However, the underlying dollar trend and the recent evolution in CAD$ price action fueled bargain hunting on dips, leaving USD-CAD close to 1.0270 by the Asia open and it is back on the rise again as liquidity picked up over the European open. Longs are still targeting 2013 highs at 1.0343 from March-1, though importer demand for CAD$ has risen and there is resistance from 1.0320 to 1.0335.