2012-12-03 20:54 (UTC)
XE Market Analysis
The dollar was mostly softer in N.Y. trade on Monday, despite the softer risk backdrop. Stocks gave back some of last week's gains, with selling coming on the heels of a sub-50 November ISM index outcome. The data dented Treasury yields as well, which helped push the dollar moderately lower. Construction spending beat expectations, though was ultimately trumped by the contractionary ISM print. Spain's request for banking bailout funds halped the euro overall, though fiscal cliff concerns in the U.S., provided little support to the dollar overall. EUR-USD ranged between 1.3033 and 1.3075, remaining bid through the afternoon, while USD-JPY eased under 82.20, after opening near 82.40.[EUR, USD]
EUR-USD tripped stops above 1.3050 early in the session, after Spain made a formal request for EU bank bailout funds. Aid will be disbursed on December 12, according to a statement on Reuters. Note, Spain has still not made an official request to activate ECB OMTs. EUR extended quickly to 1.3075, where another batch of option triggers and technical resistance is noted ahead of larger 1.3100 option exposure. Persistent EUR-USD buying returned after a brief dip under 1.3040, which took the pairing to just under 1.3075 in subsequent, despite softness on Wall Street. Model fund bids have been noted from the N.Y. open, while "stop-in" buying was seen on the break over 1.3050. Good offers are noted into 1.3100, with buy stops over the figure.[USD, JPY]
USD-JPY is weighed by overstretched speculative positioning, which fueled the move from 82.30 down to 82.10 after the European open. The BoJ policy outlook should still encourage yen sellers on upticks and USD-JPY demand is likely from 82.00 down to recent lows at 81.70, but a break out on the topside may be difficult given market positioning, as well as large outstanding 83.00 barriers. CFTC data revealed that IMM speculative yen shorts hit five year highs last week. USD-JPY ranges stayed narrow in N.Y., with the pairing managing about a 82.20-40 band.[GBP, USD]
Cable hit session highs just over 1.6055 after U.K. PMI hit 49.1, which was better than expected. The BoE revealed that net lending via the FLS in Q3 2013 was 0.5 bln and total drawdowns reached GBP 4.4 bln. It may be too early to fully judge whether the scheme will be a success, though details are a bit disappointing. BoE's Fisher said it is too early to use data as a reliable indicator, but signs are that it will help credit supply amid a widespread fall in funding costs. Cable was on the front foot ahead of the release amid U.K. clearer demand related to a dividend payment, along with the supportive risk backdrop. Later in N.Y. large standing offers from 1.6060-80 and 1.6100 barriers were eventually filled in, as cable peaked at 1.6116 into the London close.[USD, CHF]
EUR-CHF edged over 1.2060 after some swissy longs cut positions after EUR surged in Asia. Ranges have been tight since the European open as the market digests plans by the Greek debt agency to buy back debt by a Dutch style auction. Greek bonds have advanced, but movement across FX and stocks is contained. Swiss data included a 2.7% rise in retail sales, which compared with 5.4% previously and was a bit weaker than expected. PMI data beat expectations and improved to 48.5 in November from 46.1 in October. EUR-CHF looks limited under 1.2065-70 offers, while USD-CHF is stable around 0.9250, but may see some upside after no progress was made under the 0.9250 trendline after last week's break lower. Offers are tipped into 0.9280-00.[USD, CAD]
USD-CAD eased to near the bottom of its recent range in early North American trade, as risk appetite improved on the back of better China PMI, and Spain's request to recapitalize its banking system. The pairing touched 0.9915 lows early in the session, though dealers continued to report bids into 0.9900, which apparently put a floor under the level. This said, larger stops are building underneath the figure, and a break there would bring the November 7 low of 0.9875 into view. This was not to be however, as risk levels faded as Wall Street slumped. The U.S. fiscal cliff worries continue to keep markets jittery. USD-CAD made its way back toward 0.9950 in subsequent trade, as positions were pared into Tuesday's BoC policy announcement.