2013-04-04 10:00 (UTC)
XE Market Analysis
The JPY remained soft in Europe after the BoJ exceeded expectations, targeting an expansion of its monetary base and increased purchases of JGBs and longer duration. USD-JPY surged from under 93.00 over 95.50, which weighed on EUR, GBP and AUD versus the USD. Ahead of key policy decisions from the BoE and ECB both EUR and GBP struggled. Eurozone services sector PMI data was disappointing, but U.K. services sector PMI was much better than expected, which will help the U.K. just avoid a triple-dip recession. Spain had another healthy debt auction, but ahead of central bank policy meetings the impact was minimal.[EUR, USD]
EUR-USD moved back through 1.2800 after disappointing services sector PMI data from Germany and France. The German reading remained in expansionary territory at 50.9, but came in much weaker than expected. The French reading was well below expectations and is deep in contractionary territory at 41.3. EUR has struggled to sustain higher levels since late Asia, where aggressive BoJ policy action fueled a very strong USD-JPY bid, which has boosted the dollar right across the board. The outlook for the EUR is for further weakness and dovish sounding rhetoric from Draghi could see 2013 lows around 1.2750 give way. Sellers on the topside are increasing in size into and around the 200-dma at 1.2890.[USD, JPY]
USD-JPY surged from 92.90 over 95.50 after the BoJ exceeded expectations. Thereafter, it edged out highs of 95.70 and then consolidation set in. Profit take orders have been place at 95.70 and into 95.90-00 ahead of resistance around 96.10 and 96.20. EUR-JPY moved just above the Ichimoku cloud top at 122.48, but a close above this level is needed to confirm higher levels. A number of CTAs are likely to turn positions on a positive close here, but today's ECB presser is likely to be pivotal in this respect.[GBP, USD]
Cable headed to 1.5035 ahead of the services sector PMI release. The downturn in Cable came on general dollar strength following the BoJ decision and ahead of the BoE policy outcome. Cable was supported on Wednesday by U.K. corporate flows and disappointing U.S. data, but still struggled to sustain higher levels on its own steam. U.K. services sector PMI came in at 52.4 from 51.8 previously, which was better than expected and should ensure that the U.K. just about avoids a triple-dip recession. Cable only got a small fillip on the release and edged up from the 1.5050 region to 1.5080, though positions are likely to be restrained ahead of the BoE announcement. A steady hand is widely expected.[USD, CHF]
EUR-CHF is supportive around 1.2150 after USD-CHF demand lifted it out of 1.2135 overnight. The dollar pairing was boosted from 0.9445 back over 0.9500 amid general dollar strength after the BoJ's aggressive policy move and EUR-USD heaviness after disappointing eurozone services sector PMI releases. USD-CHF longs got caught offside after yesterday's failure to clear Monday's highs around 0.9525, but after it corrected overbought levels it is now in good shape to make a run on last week's highs around 0.9550.[USD, CAD]
USD-CAD bumped a bit higher after the softer U.S. data on Wednesday and it has consolidated gains over 1.0150 in Asia and Europe. Bids from 1.0120 to 1.0100 have put a floor under the pairing in recent session, but there are still offers parked from 1.0170 that resulted in another session of range-trading. More of the same is likely, as markets brace for more policy announcements the ECB and BoE.