2012-12-13 07:52 (UTC)
XE Market Analysis
JPY is the main mover after U.S. Fed delivered a truly open-ended ultra accommodative policy stance. It continued its pronounced weakening trend continue, which lifted USD-JPY and EUR-JPY to fresh trend highs. USD-JPY moved over 83.50 in Asia after closing in New York yesterday at 82.50, while EUR-JPY cleared 109.50 by early Europe. Now that the FOMC has passed the focus shifts to the Japanese election on Sunday and of course the ongoing U.S. fiscal cliff negotiations. In the midst of the pronounced risk-rally the commodity bloc currencies are performing particularly well, with AUD-USD logging a 10-week high of 1.0585 and AUD-JPY reached an eight-month peak. In Europe, the eurogroup meet should pave the way for a payout of the Greek bailout tranche. The SNB is expected to maintain policy status quo, which could upset recent swissy shorts. Meanwhile, Italy will test the market with a bond auction, but yesterday's bill sale went without any problems.[EUR, USD]
EUR-USD continues to trade on the firmer side following the Fed announcement and the break through on single bank supervision in the eurozone. Momentum was restrained to degree as market participants digested massive USD-JPY demand as funds position into Sunday's Japanese election. EUR-USD ran into natural supply around 1.3100 and offers are layered towards 1.3130, but longs are targeting September-16 highs of 1.3168. The downside is contained by general speculative activity, along with EUR-JPY's bid tone. It's uptrend was greased by strong demand related to samurai issurance, along with M&A related news. Short term buyers are tipped from 1.3150-60, while on the daily chart we note support into 1.3030 and 1.3000.[USD, JPY]
USD-JPY raced higher in the wake of the Fed decision and there was considerable volume that went through in Asia. A series of long standing option triggers were flushed out on the way up to the 83.70 area. Both Japanese accounts and offshore names were evident in the upswing, though we note exporter offers, as well as more outstanding knock out triggers from 83.70 to 84.00. The JPY crosses were buoyed by appetite for yield, along with M&A flows and samurai issuance, which put a strong bid up EUR-JPY. USD-JPY trend watchers will focus on 2012 highs at 84.20, which is likely to be vulnerable as we approach the weekend. Note, that risk reversal skew for yen put are at multi year highs, along with speculative shorts, underlining the extent of market sentiment. Sources also reported more hedge fund demand for yen puts in recent sessions with barriers from 85.50 to 86.00.[GBP, USD]
Cable benefited from risk appetite, which fueled a move over 1.6160 in N.Y. and it traded close to 1.6140 in Asia. Good offers are tipped into November-1 highs around 1.6175, while there were reports of 1.6200 hedging on Wednesday, which is due to roll off today and Friday. Today's U.K. CBI industrials trends data is likely to be more of a challenge for GBP traders and may reaffirm triple-dip recession risk. This may have the potential to fuel GBP profit taking by longs, though near-term support is eyed into 1.6100 and below.[USD, CHF]
USD-CHF moved to 0.9240 in the wake of the Fed decision. The dollar fall was speculative as short term accounts keyed off an extended risk-rally, though the U.S. market reaction was more restrained. The impact on EUR-CHF was limited. It maintains a stable tone around 1.2120 ahead of the SNB policy announcement. Swissy shorts are positioning for EUR-CHF upside due to recent policy speculation after the move by UBS and CS to charge on CHF deposits. However, it is widely expected to maintain the current policy stance, which includes the EUR-CHF lower limit at 1.2000. Profit taking could send it back towards recent lows between 1.2075 and 1.2060 on a steady hand, while resistance is noted from 1.2140 and at 1.2175.[USD, CAD]
USD-CAD was quiet through the morning session, as traders stayed sidelined into the FOMC announcement. Later, the pairing gave the 0.9850 level a quick look before rebounding some, though after the FOMC, was forced through bids at the level, tripping sell stops just underneath. The pairing posted a low of 0.9827, levels last seen on October 18, though from here, bids were seen building from 0.9820, which put a floor under it.