2013-01-29 18:52 (UTC)
XE Market Analysis
The dollar pulled back some in N.Y. trade on Tuesday, as the period of consolidation following last week's gains appeared to have run its course, and as risk appetite improved. EUR-USD popped toward 1.3500 on largely European name buying, while cable followed in the euro's footsteps. USD-CHF dipped briefly under 0.9200, while USD-CAD moved lower on the back of four month highs in oil prices, and firmer equities. Activity slowed in afternoon dealings, as the market looked ahead to the FOMC announcement and the ADP employment survey on Wednesday. Tuesday's calendar was light, and revealed nearly unchanged home prices in November, while January consumer confidence was much weaker than forecasts. Into the Fed, we look for relatively quiet trading conditions overnight.[EUR, USD]
EUR-USD was boosted towards 1.3450 amid European account demand related to the ECB fix at 13:15 GMT. A few early interbank names got caught long after the European open in anticipation of European central bank demand, but a Middle Eastern account sold a good clip from 0.8565 and light stops dragged the EUR broadly lower. From here, the dip buying mentality that has been in place since late last week, influenced. EUR-USD popped up to 1.3496 highs from near 1.3450, as U.K. and German name buying was noted. A large German bank was a good seller of USD-CHF at the same time, which may have helped the euro dollar pairing higher as well. Proprietary names along with an Asian central bank were on the offer into 1.3500, while defense of 1.3500 barrier option may impact near term. Stops are seen above the figure.[USD, JPY]
USD-JPY found a floor under 90.40 in early trade, moving over 90.75 as risk appetite picked up some. After lunch, reports that the Sprint-Softbank deal could be blocked appeared to have caused a hiccup, taking USD-JPY from 90.65 to 90.42 briefly on the headlines from Bloomberg, before it bubbled back up again. The U.S. Department of Justice reportedly asked the FCC to defer action on the purchase of Sprint by Softbank of Japan for $20 bln. The pairing settled over 90.60 into the close.[GBP, USD]
Cable posted a relief rally on the coattails of EUR-USD strength, which carried it up from 1.5710 over 1.5765. EUR-GBP pulled back from 0.8565 on the second occasion since midway in the European morning amid talk that one reserve manager may be repositioning out of the cross after the recent strength. The current sterling gains may not be sustained though, given the underlying trend, which was exacerbated recently by U.K. economic fundamentals. Cable should meet sellers into 1.5780 and 1.5800. EUR-GBP is supported on dips, but 0.8500 strikes in the short end have traded since it moved to fresh trend highs over 0.8580 yesterday.[USD, CHF]
Hedge fund buying supported EUR-CHF into 1.2400, but it is struggling to sustain altitude since it pulled back from over 1.2500 yesterday and cleared out stops under 1.2450 and 1.2430 today. USD-CHF is meeting another round of corporate selling back across 0.9215-20 after a German name forced the dollar pairing to 0.9194 lows and threatens to overwhelm the cross as liquidity dries up over the London close. EUR-CHF will take it guidance no doubt from developments in the eurozone and EUR-USD performance. However, support at 1.2370 could be tested in the next 24 hours based on weakening daily indicators.[USD, CAD]
USD-CAD was steady overnight, just managing a 1.0045-65 trading band. Standing bids were still noted at 1.0040, with offers from 1.0080. Risk levels picked up later in the session, allowing USD-CAD to move to intra day lows, touching 1.0026. Bids at 1.0040 were cleared out, though more were reported at 1.0020 and 1.0000, so downside progress from here may be slow. With oil and equities on the rise though, gains from here may be limited, though there are plenty of traders looking to continue to work the recent range.