2013-03-05 22:30 (UTC)
XE Market Analysis
The dollar firmed broadly in N.Y. on Tuesday, despite the surge on Wall Street. Risk appetite was ramped up, taking the DJIA to record highs, while supporting the grreenback at the same time. The usually risk sensitive CAD stayed soft into Wednesday's BoC meeting, while it appeared euro sellers got the upper hand in front of Thursday's ECB meeting, where there have been some bets paced for a rate cut. On the data front, U.S. February non-manufacturing ISM helped the tone, which was started in Europe with better EU and UK services PMI data. Wednesday's U.S. calendar reveals the February ADP employment survey, January factory orders, weekly EIA petroleum inventory data, and the Beige Book for the March 19-20 FOMC meeting. The ADP jobs report will likely set the tone for Friday's official BLS report on Friday.[EUR, USD]
EUR-USD drifted to option expiry levels at 1.3050 after it was unable to progress on the downside. After it met fund offers from 1.3075 during the European morning it headed to the 1.3015-20 region, where European backed support was noted. EUR-USD dipped under 1.3015 in light trade, despite the improved risk backdrop. Sellers emerged after the combination of 1.3050 option expiries, and the better ISM print, both at 10:00 EST. Bids seen into 1.3000 should contain the downside, though focus will likely shift to the ECB announcement on Thursday, and relatively quiet trade should ensue overnight.[USD, JPY]
USD-JPY headed up over 93.50 after the U.S. ISM services index gave it positive traction. Buyers emerged from the 93.20 area and it quickly moved just over 93.50. The move was a function of broader dollar gains rather than specific yen flows and similar action was mirrored via EUR, GBP and CHF. USD-JPY gains from here are likely to slow given the Japanese corporate influence that has been evident since the start of the week and it may ebb back towards 93.10-20, where N.Y. account buyers were noted early on.[GBP, USD]
Cable backed away from 1.5150 support after the dollar firmed up following the ISM services index. Cable had been shackled by two way action. Bids kept it propped up from 1.5145-50 since it broke higher following the robust U.K. services PMI, while offers from proprietary accounts and short term funds capped from 1.5180 to 1.5200. Offers have been in place from 1.5200 to 1.5220 since the end of February and look like keeping the bias on the lower levels now that the short covering rally has run its course. On an intra-day basis, short term sell stops are tipped through 1.5120 and longs built up in the last 24 hours may bail if 1.5100 gives way.[USD, CHF]
EUR-CHF firmed up after EUR-USD regained its poise over 1.3000 amid a rise in risk appetite. EUR-CHF steadied just under 1.2240 on Monday and closed around the 1.2250 area, which encouraged light demand on dips today and it extended to 1.2285 after eurozone services PMI data. Momentum on the upside was limited into offers at 1.2280-90, along with some reluctance to over extend EUR longs ahead of Thursday's ECB meeting and of course the ongoing political uncertainty in Italy. USD-CHF has found a modicum of support into the 0.9400 region after it pulled back from 0.9440 on Monday, which compared with Friday's rally highs just over 0.9460. USD-CHF momentum should remain with the upside, though over 0.9450 movement could be challenged by supply related to outstanding option barriers.[USD, CAD]
USD-CAD pulled back under 1.0260 in London, following the greenback's overall trend lower. Support remained in place at 1.0250, and generally, the pairing will likely be driven by pre-BoC positioning adjustments. The Bank will keep rates unchanged, though we see scope for a more dovish alteration in language in the March announcement. As a result, USD-CAD downside was limited today, despite the firmer risk backdrop. USD-CAD ran into good selling pressure over 1.0290, and has since pulled back marginally under 1.0280. Firmer equities and an uptick in oil prices did not help the loonie on Tuesday, likely as the market positioned for Wednesday's BoC announcement. 1.0300 offers are in place, with stops at 1.0320, ahead of 1.0350 barrier option. Support meanwhile, is touted at 1.0250.