2013-05-29 17:28 (UTC)
XE Market Analysis
The dollar sagged into the N.Y. open on Wednesday, as lower equities and Treasury yields weighed. Most of the action came before the official N.Y. open, resulting in relatively quiet trade through the session. The greenback was on a softer footing overall, with EUR-USD supported over 1.2950, and USD-JPY struggling over 101.00. USD-CAD ended up rallying following the BoC announcement, where the bank retained its watered down tightening bias. There was no U.S. data to speak of, and the FX markets largely eyed equities and yields through the day.[EUR, USD]
Price action settled after sharp EUR-USD gains, which gathered momentum into the N.Y. open. Sources cited several factors, including hedge fund dollar selling against a basket of currencies and very heavy corporate interest via EUR and JPY. EUR-USD peaked near 1.2975 in early trade, before settling into a 1.2970-25 band through the remainder of the session. As equity gains helped the dollar yesterday, stock losses reversed the greenback's course on Wednesday.[USD, JPY]
USD-JPY posted intra day lows of 100.71, as the dollar generally maintained a negative bias. The May 24 low of 100.67 looks to be initial support, though Japanese bids (importers) are expected to slow losses. Sell stops were noted under 100.80, but had little impact. The pairing rebounded marginally toward 101.00 in light afternoon trade.[GBP, USD]
Cable edged out session highs of 1.545 as the dollar consolidated earlier losses, while EUR-GBP pulled back from late European morning highs of 0.8595 to trade into 0.8555. The cross was boosted by month-end related demand and now the order has been filled it has settled back inside the familiar range. However, more interest could still go through in the coming day or two, while Cable may see limited upside due to a weak technical picture. PIMCO's Amey tipped more Cable weakness when Carney takes over at the BoE and said sterling could fall as low as 1.3700.[USD, CHF]
CHF benefited from safe haven demand, which fueled a EUR-CHF drop from 1.2570 to 1.2440 lows. Corporate accounts were buyers of the CHF from the open, while a reduction in speculation positioning accelerated after the IMF cut the China growth outlook and stocks tumbled. The EUR-CHF downturn also triggered a USD-CHF reversal from 0.9790 to 0.9620 lows and stops were evident through both 1.2500 and 0.9700. Options are expected to attract in EUR-CHF at 1.2500 today, while USD-CHF movement from here will be dependent on how U.S. yields and stocks perform during the N.Y. session. During Tuesday's session strong U.S. data boosted stocks, yields and the dollar as investors keyed up the improving U.S. outlook.[USD, CAD]
USD-CAD eased back to session lows of 1.0355 from 1.0375 following the BoC announcement, where rates were left unchanged at 1.00% as expected, and as the Bank retained its watered down tightening bias. The statement said 1.0% rates were "appropriate for a period of time", but added, an increase is likely required later. There had been speculation the BoC would remove the bias cleaning the slate for the new incoming governor. The pairing tested the 1.0350 level, where standing bids had been noted. Buyers quickly returned, taking the pairing briefly back over 1.0400, as the deteriorating risk backdrop appeared to weigh on the CAD. There was some talk of a large CAD selling futures trade into the BoC announcement, though details were sketchy.