2013-05-29 06:22 (UTC)
XE Market Analysis
The dollar held on to a firmer tone in Asia following yesterday's U.S. data strength, which elevated U.S. Treasury yields. EUR traded into 1.2840 and Cable moved under 1.5020, leaving it close to 1.5000 option barriers. USD-JPY held on to a firm tone as a result of dollar firmness, leaving it close to 102.40, but the JPY crosses were weighed by sell-interest via EUR, GBP and the commodity bloc currencies. AUD fell to fresh trend lows amid macro fund selling due to rising concerns over the outlook in Australia, which cleared away long-term support at 0.9580. It was quiet session on the data front. Japan April retail sales posted a negative reading for the fourth consecutive month at -0.1% y/y, but the headline number was not as bad as feared. Australia Q1 construction work done was much weaker than expected at -2% q/q, but new home sales rose 3.9% and the March Westpac/MI leading index came in at 290.3 from 289.7 previously, which pointed to above trend growth.[EUR, USD]
EUR-USD was pressured by underlying dollar strength following yesterday's U.S. data, which continued to fuel optimism over the U.S. outlook and reinforced expectations of Fed QE tapering. The negative EUR set-up came after yesterday's plunge towards the 1.2850 region, which encouraged good selling pressure on upticks in Asia. After opening around 1.2855 it triggered stops en-route to the 1.2840 area. Traders eye May 23 lows near 1.2820 as initial support. There was some talk of sovereign buying interest at the lows, which seemed to have put a temporary floor in place. Two-way interest is noted from 1.2800 to 1.2820, though stops are seen building from 1.2790 now.[USD, JPY]
USD-JPY maintained a firm tone over 102.00, though did experience some price chop between 102.00 and 102.50 over the course of the Asian session, which mirrored today's movement via Japanese stock markets. The elevation in U.S. yields was a supportive lead overall and it ended the Tokyo session close to 102.40, although there were reports of more exporter hedging and talk of interest related to repatriation. The downside was underpinned by both macro types and importers towards 102.00 and more bids are noted into the 101.80 region. The JPY crosses lacked upward momentum. AUD-JPY was weighed by fund selling via AUD-USD, which left it around 97.50 from just over the 98.50 region. EUR-JPY was in a holding pattern around 131.50 after it rejected levels over 132.00 yesterday and GBP-JPY fell back from 154.00 to 153.25.[GBP, USD]
Cable headed towards option barrier support at 1.5000 in Asia on broad dollar strength. Cable broke down on Tuesday after firm U.S. data, which reinforced expectations that the Fed could start to taper QE in the coming months. After starting the Asian session close to 1.5050 it printed 1.5008 lows. Cable is trading around levels where natural buying interest could emerge, including reserve management flows and long-term hedging from corporate accounts. Previously, the BoE have not seemed keen on Cable sustaining movement under 1.5000 due to imported inflation, but given the underlying dollar trend it is now looking more likely that Cable will extend current losses.[USD, CHF]
The CHF maintained easier levels as stocks sustained the recent rally. EUR-CHF traded as high as 1.2572 in late Asia, while USD-CHF extended to the 0.9790 region. Since the European session got underway corporate swissy demand has emerged, along with profit taking by some fund names. EUR-CHF edged back towards 1.2540, which moved in tandem with a USD-CHF dip into 0.9755. However, dip buying should continue to support both the cross and the dollar pairing, though ranges could tighten up as option flows begin to emerge on further swissy weakness. USD-CHF barriers are noted at 0.9850, while a build up of option strike congestion is noted in EUR-CHF from 1.2600.[USD, CAD]
USD-CAD consolidated Tuesday's gains during overnight trade. It extended to 1.0420 after racing up through 1.0400 barriers by yesterday's Northy American close. There was light profit taking into the European session by range players fading moves ahead of resistance at 1.0430, while positive guidance for CAD$ came from AUD-CAD flow and stock market firmness. It is likely that some light repositioning will go through ahead of today's BoC policy announcement, where there has been speculation the Bank could drop its long in the tooth tightening bias. However, it is widely thought that Carney may decide to leave things as they are until the new governor Polaz takes charge from June.