2013-05-23 19:23 (UTC)
XE Market Analysis
Fallout from Bernanke testimony continued overnight, ultimately sinking equity markets and the dollar in the process. On top of that, China May PMI fell under the 50 mark, which spooked traders as well. U.S. data was better than expected, with jobless claims lower, and new home sales higher. The dollar later moved another leg lower, in concert with Wall Street paring losses. Long USD positions were reportedly thinned out through much of the morning, in front of the long weekend in the U.S., taking the dollar off trend highs overall. EUR-USD ran into sellers over 1.2950, while sterling, CHF and CAD all firmed up. USD-JPY largely bucked the afternoon trend, and hovered just under 102.00.[EUR, USD]
EUR-USD firmed up in London on better than expected eurozone manufacturing PMI data. The composite reading improved in May amid better readings from France and Germany in the early releases. EUR found support ahead of 1.2820 after the London open and filled sell orders from 1.2860 to 1.2880, where it opened the N.Y. session. Euro short covering was a feature through the morning, which helped it to highs over 1.2950. A turn around on Wall Street appeared to have lifted EUR-USD to its best levels, though sellers emerged over 1.2950.[USD, JPY]
USD-JPY struggled to hold on to higher levels and drifted into 101.30 early in the session. Only short term buyers were noted, but larger Japanese flows are seen into 101.00 and below. If USD-JPY holds above 100.80, Japanese buying may pick up again in Tokyo on Friday. Indeed, the pairing recovered back over 101.90 in late trade. On the chart, there is decent support from 100.50-60 and into 100.35 ahead of the psychological 100.00 level. The options market has also seen heavy demand for volatility due to underweight gamma exposure and this could also begin to support on dips. On the topside from 101.80 to 102.00 offers are starting to build from range types.[GBP, USD]
Cable mirrored EUR gains and headed to 1.5125 in N.Y. trade. The second U.K. GDP estimate came in at 0.3% q/q and 0.6% y/y, which fueled light demand from the 1.5050 region, though it had already benefited from strong bids ahead of 1.5020 in early Europe. USD-JPY's deep drop to the 101.00 area from over 102.50 at the European open also weighed on the dollar a touch. GBP suffered in recent sessions on weaker than expected U.K. data, while general USD strength also flushed out a number of long positions in Cable, including option barriers. However, the 1.5000 area should fuel decent demand from corporates, offshore investors and sovereign names. It has not traded under this level since the BoE highlighted the consequences of sterling weakness on inflation back in March.[USD, CHF]
EUR-CHF got a fillip from stocks, which pared losses on more encouraging U.S. data. Movement has been fairly choppy since the N.Y. session got underway, though ranges are much narrower than Asian trade and the European morning. The steadier market tone fueled leverage account interest out of 1.2450 and it added to gains from 1.2480 after the U.S. new home sales data, which helped USD-CHF up from 0.9640 to 0.9700. Where the CHF trades from here will depend on how U.S. markets end the session, but more importantly sentiment in Asia will be key after today's steep Japanese market losses. There was talk in the European morning that real money were swissy buyers and they are unlikely to liquidate positions so prematurely.[USD, CAD]
USD-CAD touched 1.0393 trend highs in Asia, and again in European trade, though faded toward 1.0325 into the North American open. Barrier options at 1.0400 were reportedly defended, though the recent USD-CAD downdraft came with overall USD softness. Bids were seen into 1.0320, which put a floor under the pairing, though as risk appetite improved later in the session, USD-CAD eased back under 1.0300.