2013-04-03 20:44 (UTC)
XE Market Analysis
The dollar weakened in concert with a softer than expected March ADP employment survey, and a lighter than forecast March non-manufacturing ISM report. After basing in N.Y. just under 1.2810, EUR-USD managed highs near 1.2865. USD-JPY meanwhile, slipped under 93.00, despite the the BoJ policy announcement tonight. Weaker equities provided little support to the dollar, and overall, activity was light, as it appeared participants kept a low profile into the BoJ, ECB, and BoE announcements tonight into tomorrow.[EUR, USD]
EUR-USD extended its gains after the disappointing ADP employment, and non-manufacturing ISM data, taking the pairing to session highs over 1.2860. Quiet FX trade prevailed through the afternoon session, though the dollar stayed heavy following the disappointing U.S. data releases. The euro is likely to consolidate ahead of Thursday's ECB policy announcement, where the bank is widely expected to hold out for now but could open the door to further measures in May or June even if on balance we still see a slightly higher chance that rates will remain on hold this year. There were, however, reports that the ECB is preparing measures to help ease financing conditions for SMEs, in line with Draghi's comments at the last press conference.[USD, JPY]
USD-JPY downside hedging increased after the U.S data mix. Strikes traded up to USD 500 mln for Friday at 91.00 and on a 90 handle for early next week. Longs are a bit cautious ahead of the BoJ and other remaining event risks this week. USD-JPY has not traded under 92.50 since March 1st and is reportedly an options level now. This was defended by large Japanese bids and an Asian central bank on Tuesday. There are also several good support levels between 92.10 and 91.80 on the daily chart drawn off the rally from early February up to mid-March. Resistance levels of note come in from 94.00 initially and then increase in size from 94.80-00, which capped on previous tests from March 22-27.[GBP, USD]
Cable threatened offers at 1.5140-50 after the dollar lost ground following the below expectations ADP print. Cable is still having a hard time rallying on its own steam though after the earlier U.K. construction PMI and yesterday's manufacturing release. Both numbers improved slightly from February, but were still under expectations. Tomorrow's services PMI is the more important number and is expected to ease slightly, but taken together with other data releases the U.K. should just about avoid a triple-dip recession, but it will be by a narrow margin.[USD, CHF]
The CHF firmed up in N.Y. trade, with the franc perking up versus both the dollar and euro. Longs are targeting Monday's highs at 0.9527, where buy stops are tipped ahead of last week's 0.9554 highs, though the weak U.S. data, stymied those plans on Tuesday. Overnight, ECB's Coeure said the ECB is not worried by SNB interventions and doesn't see any negative impact from its current policy stance.[USD, CAD]
USD-CAD bumped a bit higher after the softer ADP jobs report, coming up just short of 1.0150, before easing back to 1.01425. Bids from 1.0120 to 1.0100 put a floor under the pairing, while offers parked from 1.0170 ensured another session of range-trading. More of the same is likely overnight, as markets brace for policy announcements from Japan, the EU, and the U.K.