2012-12-04 20:21 (UTC)
XE Market Analysis
The dollar was broadly weaker in N.Y. trade on Tuesday, though only marginally so. EUR-USD touched the 1.3100 mark, though ran into a wall of sellers at the figure, stopping gains in their tracks. USD-JPY meanwhile inched lower, as an overly long market slowly let some air out of their positions. The economic calendar was empty, while equities remained on either side of flat through the session. With little to influence, it appeared traders carried through with testing the greenback's downside. We suspect activity will slow into Friday's U.S. jobs report, though traders will get some insight from Wednesday's ADP employment survey. In addition, revised productivity data, factory orders, non-manufacturing ISM, and weekly EIA petroleum inventory data are all on tap.[EUR, USD]
EUR-USD traded over 1.3100, but saw limited follow through due to spec profit taking. Pullbacks from 1.3100 have been shallow amid buyers into 1.3085, while N.Y. opening levels around 1.3075 should also support. Liquidity has picked up over 1.3100 due to previous tops from mid-October, which lie ahead of 1.3150 barriers. These are part of a long-standing 1.2650-1.3150 Double No Touch option that is still alive. EUR-USD later drifted under 1.3080 on London name profit taking after large offers capped over 1.3100. N.Y. market participants rehashed a vague rumor from the European morning that Moody's could downgrade Germany, Holland and Luxembourg, but it never generated momentum. The EUR downside is congested with short term bids at 1.3070-75, 1.3040-50 and into 1.3020, which should keep longs in control into Wednesday's session.[USD, JPY]
USD-JPY hit intra-day lows under 81.9\80 as intra-day accounts keyed off of dollar losses elsewhere. The pairing bounced slightly into the options cut , as large options at 82.00 and further maturities at 82.10 and 82.35 trolled off, though was unable to crack 82.00, and later headed back to 81.75. Meanwhile, dollar longs that are still holding on for a successful run on 83.00 may be encouraged by heavy USD calls expiring at 80.00 to 81.00 that have RKOs linked at 82.85 to 83.50. It seems reasonable to expect more mobile price action once these influences are no longer in the market, though quite a number of N.Y. accounts are already sitting it out until Friday's NFP release.[GBP, USD]
Cable continued to trade on the front foot despite the U.K. construction PMI miss. The November reading moved back into contractionally territory, but Cable was unmoved around session highs close to 1.6120. The pick up in European stocks has been the catalyst for dollar selling pressure on upticks, while Cable's break over 1.6100 on Monday reinforced upside risk. Progress from here may slow due to hedging activity around 1.6125-30 and oustanding option barriers at 1.6150. EUR-GBP flows have been supportive, with corporate selling picking up since the start of the week from 0.8120-30.[USD, CHF]
EUR-CHF cleared 1.2100-20 for the first time in six weeks amid local name demand following yesterday's decision to charge negative rates on depos by one of Switzerland's largest banks. The swissy move today is speculative in nature in anticipation that capital inflows will drop off, though the improved tone in the eurozone has also added traction. Eurozone bond markets are in much better shape and this has helped to shore up the EUR downside over the last week. USD-CHF has also been stable despite last week's bearish break lower. After moving into 0.9250 it reached levels, where buyers saw good risk-reward. More support is tipped at 0.9230 and into 0.9200-10. Offers lie from 0.9300 ahead of short term buy stops.[USD, CAD]
USD-CAD dipped from 0.9950 after the BoC left rates unchanged at 1% as expected. The BoC did not pullback from its tightening bias, citing Q3 GDP weakness partly due to transitory disruptions in the energy sector. It reiterated, that over time some modest withdrawal of monetary policy stimulus was likely required. USD-CAD is trading at the familiar 0.9925 level, which is within the well worn range. However, given the gains in other currencies against the USD over the last few sessions, CAD$, may play catch up and bids at 0.9900-10 are likely to be threatened. The pairing managed 0.9920 lows after the BoC announcement, though reportedly was well supported by a variety of option and corporate backed bids from there. Buying interest is seen layered down to 0.9900, and as equities turned negative, intra day short covering lifted it back to 0.9935. Ranges overall though remained narrow and familiar. Note, a clean break of 0.9900-0.9895 could unlock support around November-7 lows at 0.9875-80.