2013-05-28 10:28 (UTC)
XE Market Analysis
The USD, JPY and CHF were easier as sentiment was positive intra-day after stocks in Asia and Europe rallied. Overall, FX volumes were quite low as market participants await fresh direction following Monday's long weekend in the U.K. and U.S. EUR tested both sides of 1.2900, but lacked impetus in either direction as macro fundamentals are offset by speculative positioning. Cable spent most of the session close to 1.5100 as month end EUR-GBP flows offset direct buying interest. USD-JPY benefited from a better market tone in Tokyo and supportive comments from Japanese officials, which helped it over 102.20. AUD-USD rebounded out of 0.9600 for the second time in recent sessions on bargain hunting and the general improvement in sentiment.[EUR, USD]
EUR-USD is trading a tight range close to 1.2900 after failing to sustain a move in either direction since the Asian session open. Upward momentum in Asia and Europe was restrained to a degree by general dollar strength as USD-JPY resumed its uptrend. EUR ran into light selling pressure from the 1.2930 region after French consumer confidence hit a record low in May at 79 from 83 in April. Meanwhile, ECB's Noyer, who is also head of the Bank of France, urged urged a cut a public spending and called for a higher pension age. Noyer also pointed out that currently no major central bank has tried negative rates. The rangebound theme looks likely to prevail in the near-term. Longer-term market positioning still argues for selling into strength, but it has not sustained lower levels and if risk appetite can remain positive it may test offers towards 1.2960 and into the 1.3000 region over the course of session.[USD, JPY]
USD-JPY extended overnight gains to trade just above 102.20. The pick up in risk appetite aided the upturn, along with Japanese retail interest via the JPY crosses. EUR-JPY moved briefly through 132.00 and AUD-JPY outperformed and headed into the 99.00 region versus 98.20 at the European open. AUD-JPY was one of the major casualties in last week's meltdown on Japanese stock markets as retail names liquidated positions to cover margin calls. However, there is evidence of fresh long position building as sentiment steadies. USD-JPY should continue to find buyers on dips after last week's failure to test 100.50-60 as and a further improvement in sentiment could see levels into 103.00 and above come back into play.[GBP, USD]
GBP-USD is hovering around the 1.5100 region after it failed to sustain higher levels in thin holiday trade on Monday. Working against the Cable upside is underlying dollar strength, though we suspect that market positioning will limit downside GBP downside potential in the coming days. CFTC data revealed excessive GBP short positioning on last Friday's release, while movement on a 1.50 handle usually brings out long-term hedging. We think the bias for sterling may be for moderate gains this week, with forward looking data, while patchy, is still likely to point towards a recovery in economic activity. Bids are tipped towards 1.5070 and 1.5050-60, while lower down option related activity will emerge ahead of 1.5000 barriers. On the topside offers are noted over 1.5050 and sellers are likely around near-term resistance at 1.5175 and 1.5200.[USD, CHF]
The CHF eased up as stocks headed higher. EUR-CHF is trading above 1.2500 versus 1.2485 at the European open after it found buyers ahead of 1.2400 in thin trade on Monday. The move out of swissy long positions, combined with underlying dollar strength, lifted USD-CHF back to the 0.9700 region compared with 0.9600 on Monday. EUR-CHF movement is mainly influenced by speculative accounts, while USD strength is coming from macro fundamentals. Last week, CHF was one of the beneficiaries of last week's meltdown on the Japanese stock market as real money names piled back into safety plays. However, we think these type of accounts will wait for a few more sessions before reducing positions aggressively.[USD, CAD]
USD-CAD maintained the recent range overall. After failing to breach 1.0300 on Monday it headed back to the 1.0365 region today. During Monday's the North American session CAD$ was weighed by speculation that deceleration in credit growth might allow the BoC to ditch its tightening bias at this week's announcement, clearing the slate for the incoming governor on June 3. However, the USD's recent failure to clear 1.0400 barriers is pointing to a potential near-term top and supply should pick up on further upside movement.