2013-04-16 21:02 (UTC)
XE Market Analysis
The dollar was mostly lower in N.Y. trade on Tuesday, as some semblance of risk appetite returned. Oil prices slowed their bleeding, while gold recovered marginally. Cooler CPI and better housing starts data helped equities and allowed EUR-USD to move toward 1.3200 from opening levels around 1.3100. USD-JPY gave back the 98.00 handle, while cable followed the euro higher. Meanwhile the AUD and CAD firmed modestly, as USD-CHF dipped. Wednesday brings the BoC policy announcement in Canada, while in the U.S., aside from EIA petroleum inventory data, and the Fed's Beige Book, the calendar is empty.[EUR, USD]
EUR-USD opened near 1.3100, and slowly made its way toward 1.3050 through the morning session. After London's departure, the pairing spiked up to 1.3185 after breaching the 1.3150 level. There had reportedly been barrier option defense ahead of the level earlier, and when they were extinguished, intra day buy stops kicked in. From here, 1.3200 should be good resistance. The IMF slashed growth forecasts for the Eurozone and the U.K. and called for "aggressive" monetary policy action to support the weak Eurozone economy. ECB president Draghi meanwhile stressed once again that monetary policy cannot solve the Eurozone's underlying problems.[USD, JPY]
USD-JPY struggled over the 98.00 mark in early N.Y. dealings, eventually heading back toward 97.25 in relatively light trade. Japanese exporter offer from 98.00 put a lid on gains, while long positions built from Monday's lows were partially unwound through the session. Ahead of the weekend G20 meeting, upside momentum may be more contained. U.S. Treasury warned Japan against competitive devaluation in its latest semi-annual FX report and other G20 countries have grumbled over Japanese policy despite assurances that it is aimed at tackling deflation rather than the currency. Another potential wild card is the Softbank Nextel bid, which could become a bid war after U.S. satellite TV provider Dish has offered to merge with Sprint Nextel. On the plus side, Softbank is long of USD-JPY around 82.20, though the $20 bln position is a potential risk for USD-JPY longs if it is forced to unwind.[GBP, USD]
Cable experienced limited upside amid talk of option related selling into 1.5330 rally highs, leaving prices tied closely to 1.5300 for the second consecutive session. EUR-GBP has also extended its rally through 0.8580 with EUR-USD and is a weight on Cable. The pairing perked up in afternoon trade, largely following EUR-USD higher. Cable is also in the middle of the recent range. Longs are still buying in front of April-08 lows around 1.5240, while movement into 1.5350 has been contained since late last week.[USD, CHF]
CHF remains supportive, with European markets still fairly cautious after the deep losses in risk markets on Monday. An overnight recovery in the EUR helped EUR-CHF out of 1.2135 support, but upside movement remains limited ahead of 1.2170, which has been the case since late last week. USD-CHF remains choppy around 0.9300 as the dollar lost some of its safety bid as Asian stocks cut losses and S&P futures rallied. U.S. trade saw USD-CHF slide toward 0.9200, as the dollar overall sagged.[USD, CAD]
USD-CAD ran into sellers ahead of 1.0260 in late North American trade on Monday, and again in London trade earlier, with standing offers seen from 1.0270. The somewhat improved risk backdrop aided the CAD into the open, with the pairing back under 1.0220. To the downside, bids were reported at 1.0200, with sell stops from 1.0180. USD-CAD moved off its lows of 1.0205 by mid-morning, back toward 1.0240, after solid bidding interest emerged into the 1.0200 level. Trade overall remained quiet though, ahead of the BoC on Wednesday, The Bank is expected to maintain its very mild tightening bias in Wednesday's announcement, as households continue to be reminded that rates will need to rise at some point. A steady 1.00% rate is also expected (median same), alongside a repetition of the view that "the considerable monetary policy stimulus currently in place will likely be required for a period of time."