2013-05-31 07:54 (UTC)
XE Market Analysis
The dollar maintained an easier tone in Asia, though month-end lowered volumes. Equity markets in the region were positive, but this did not inspire any significant risk taking in the FX space and early on in Europe stocks have weakened due to month-end window dressing. USD-JPY only experienced a limited reaction to today's domestic data releases, which indicated that Japanese monetary policy is having a positive impact. A massive 100.80 expiry is expected to keep prices contained, but note there is dollar selling tipped for the London fix today. Cable benefited from a positive close and U.K. press reports that U.K. infrastructure projects will receive a GBP 15 bln boost. However, topside movement in sterling being compromised by residual month-end flows in EUR-GBP. Meanwhile, EUR-USD is benefiting on repositioning of speculative positioning via EUR and USD after the lack of downside progress on a 1.2800 handle. The CHF is underpinned as real money are still holding on to long positions amid the recent volatility in global asset markets. Swiss economic data has also been positive, with yesterday's Swiss Q1 GDP surprising on the topside and the latest KOF leading indicator also coming in on the stronger side.[EUR, USD]
EUR-USD is supported over 1.3000 after it moved firmly higher on Thursday amid more hedge fund unwinding of dollar long positions. U.S. data was the catalyst for dollar selling and EUR gained momentum after it cleared last week's top of 1.3030 gave way, though fund sellers have been very active over 1.3050. Fundamentals are still EUR negative, but after Wednesday's failure to sustain a move on 1.2800 there is likely to be more sideways action.[USD, JPY]
USD-JPY is being pressured by ongoing dollar supply and front running by interbank names anticipating large fixing flows today. A large 100.80 expiry weighed into the European open and there was follow through selling as European stocks started on a weaker footing amid month-end window dressing. The pair is looking vulnerable on the downside and if support is filled in at 100.50 to 100.35 there could be an extended bout of repositioning into the psychological 100.00 level. A break lower would be a very negative development in the short term, though there are no signs that Japanese officials are about to pullback back reflationary policies and fund names could use any correction as a dollar buying opportunity.[GBP, USD]
Cable benefited overnight from yesterday's positive close over 1.5200, along with upbeat U.K. press reports. The government is reportedly about to inject GBP 15 bln into infrastructure projects, while the BCC upgraded the U.K. growth outlook and the latest Gfk consumer confidence data came in on the firmer side. Cable headed to 1.5240, but fell away as liquidity rose into the European open as residual month-end flows weighed on the broader sterling tone. We think Cable is still likely to see short term demand on dips and buyers are noted at 1.5190 and into the 1.5170-75 region.[USD, CHF]
The CHF maintained a stable to firmer tone as month-end trade and choppy equity market moves limited speculative activity and kept real money positioned in favor of safety. The CHF has also had the added benefited of positive economic data. Yesterday's Swiss Q1 GDP came in on the firmer side and today's KOF leading indicator also points to more upside in the Swiss economy after it came in above expectations. EUR-CHF dipped below 1.2430 and USD-CHF eased from 0.9550 back towards the 0.9535 region. However, both the cross and the dollar pairing are at levels where buyers have been noted in recent sessions and progress at current levels will remain slow.[USD, CAD]
USD-CAD recovered after it headed under 1.0300 during yesterday's N.Y. session. It idled around the 1.0295-00 region in Asia and then headed higher into the close. In Europe, movement was directly influenced by stocks, which came under pressure and weighed on CAD$, leaving the dollar pairing over 1.0340. Price action in USD-CAD has been disjointed and difficult to follow this week due to volatility across asset markets and commodities. Month-end is likely to see more of the same and note there is speculation that dollar selling could go through. Any USD-CAD upside should be viewed with caution and supply could emerge towards 1.0360-70. Natural buyers are tipped towards 1.0300 and 1.0285-90.