2013-03-11 08:57 (UTC)
XE Market Analysis
Monday in Asia normally means narrow ranges among the major currencies and today was no exception, with markets having remained in consolidation mode following Friday USD rally. A fresh four-and-a-half-year high in the Nikkei stock index and 18-month peak in the MSCI Asia Pacific failed to stir currency markets much, though the backdrop helped lift AUD marginally. The strong U.S. payrolls report of Friday and concomitant Wall Street rally contrasted with a disappointing batch of Chinese data, including sub-expectations production and new loan numbers, alongside perkier than forecast inflation figures.[EUR, USD]
EUR-USD didn't budge much from Friday's New York closing level of 1.3004, holding steady after the post-U.S. jobs report drop from levels above 1.3100. Selling interest was reported above 1.3010-20, and stalled at an intraday high of 1.3013 in Asia. Bids were reported into 1.2980, and at 124.50-60 in EUR-JPY. EUR-USD support is marked by Friday's 1.2955 low. There is market talk of a large option expiry at today's NY cut with a strike at 1.3000, which on a quiet day may exert some gravitations pull around this level.[USD, JPY]
USD-JPY was glued around 96.00, having ventured no lower than 95.94. Some exporter selling of the pair had been seen while sell stops were not seen in size until just under 95.00. Japan core machinery orders fell 13.1% m/m to start out 2013, a much larger decline than expected after a 2.8% m/m rise in December. Meanwhile, a scan of market news headlines suggest that Japan markets continues to benefit from the prospects more committed deflation-busting policies, with nominee governor Kuroda having said today that the central bank will consider buying derivatives if he's confirmed as governor and also showing that it will be ready a quick expansion in monetary stimulus. This should help maintain relative yield spreads in favour of the bearish yen trend.[GBP, USD]
Sterling managed to rebound versus the USD, back above 1.5000 into the N.Y. open, but was smashed lower after the U.S. jobs report, touching new trend lows of 1.4885. The speculative segment of the market will be running a pretty large net short position in the pound, which has potential to fuel a position-squaring rebound. It was not to come on Friday however, as the pairing was unable to rally beyond 1.4950, and closing at 1.4920. Eurogroup head, Dijsselbloem, said in a speech that a "a new sterling crisis could happen again" due to the state of public finances. His remarks won't rattle the market much as participants have for some time now been talking about the potential for a sterling crisis given the Britain's ongoing tight fiscal but loose monetary policies, along with prospects for continued relatively-high inflation and anaemic GDP performance.[USD, CHF]
EUR-CHF logged a three-week high of 1.2371 amid the improve risk appetite backdrop, driven by the better U.S. jobs report. EUR-CHF resistance is at 1.2388 (the Feb-13 high) and again at 1.2400 and 1.2406 (the Feb-4 peak). Trendline support is pegged at 1.2355, while a trend break would be signalled by a breach below 1.2300. USD-CH meanwhile surged to levels last seen in September, peaking over 0.9550. Swiss February CPI came in today at -0.3% y/y, unchanged from January, and matching the widespread expectation. The figure compares to a -0.9% y/y rate that was seen in February 2012, which underscores the impact that the currency limit peg has had in curtailing deflationary price pressures. Negative inflation rates are persisting, however, a backdrop that should ensure that the SNB remains committed to loose monetary policy and the EUR-CHF peg despite signs of economic improvement in recent data.[USD, CAD]
USD-CAD eased back under 1.0300 in early North American trade, after peaking near 1.0315 in London. Initial USD-CAD support was seen at 1.0250, with resistance at 1.0340. Barrier options remained in effect at 1.0350. The pairing subsequently slid to 1.0235 from near 1.0300 on the combination of strong employment reports from both sides of the border. Support at 1.0250 was easily breached, though bids were seen in place from 1.0220 to 1.0200. Intra day short covering helped the greenback higher into the close, with USD-CAD testing 1.0300 again.