2013-04-19 10:23 (UTC)
XE Market Analysis
Risk appetite held up as stocks gained in Asia and Europe, which added weight on USD and JPY. There was a pick up in yen short positioning after Japan avoided criticism at the G20 and USD-JPY cleared 99.00 on early U.S. account demand, which carried it to 99.35 and EUR-JPY printed 130.00. EUR-USD edged up from 1.3060 towards 1.3100, but bumped into strong offers for the second consecutive session, leaving it confined to a narrow trading range. Cable outperformed in Europe, rallying out of 1.5290 to 1.5368 in anticipation of flows related to the Vodafone Verizon deal, which inspired long position building. Although the European morning saw increased position taking flows were generally patching and activity was still quite low.[EUR, USD]
EUR-USD is still restricted by offers from 1.3100 despite the improvement in sentiment today and yesterday's lack of downside progress, which triggered a short covering rally. A EUR-JPY surge from 128.80 to 129.90 was offset by EUR-GBP's drop from 0.8545 to 0.8505. EUR-USD is still bearish on the daily chart, but the topside is looking more likely to break after strong bids protected 1.3000 on Thursday and there was a notable pick up in central bank reserve management flows this week that was more favourable for the euro.[USD, JPY]
USD-JPY broke higher after 99.00 offers gave way, while there was also talk of a GBP-JPY fixing order. Volumes have not been large though, with most of the activity reportedly on stops after a U.S. named turned a USD-JPY position. Japan has managed to avoid overt criticism of its policies judging by comments out of the G20 overnight and this has many market participants positioning ahead of the next BoJ policy meeting. USD-JPY's fall to 95.80 on Monday cleared out a lot of excessive positioning and it is now in good shape to push back towards the 100.00 level. In fact, Japanese names have been dollar buyers throughout the week, while the bulk of the sell-interest came from offshore funds. USD-JPY traders tip a 99.50 expiry today, which could reinforce upward momentum.[GBP, USD]
Cable has outperformed since the European open. After buy stops at 1.5315 gave way follow through demand carried it through 1.5360. The pair remained firm throughout just shy of good offers from 1.5370-80 and 1.5400. There was early speculation of GBP-JPY demand, while there is further talk that interest related to the Vodafone Verizon deal could go through. Note, however, that Vodafone would face a massive capital gains tax bill and this is believed to have delayed progress despite assurances from Verizon that this is not the case. The Vodafone stake is worth as much as GBP 80 bln and has lifted shares as much as 25% since the start of the year, according to Bloomberg data. If the deal goes through it would lead to massive sterling inflows.[USD, CHF]
EUR-CHF rallied to one-week highs around 1.2185. The pick up in risk appetite and EUR-JPY demand provided a positive lead. However. since it registered session highs a USD-CHF move from 0.9315 to 0.9295 has weighed, leaving the cross close to 1.2170. Directional bias is still being hamstrung by EUR price action. The EUR tried to break the bottom of the recent range and failed on Thursday and is having a hard time clearing 1.3100 offers today, pointing to more range bound action for the CHF.[USD, CAD]
USD-CAD is hovering over the 1.0230 area after it slipped lower on the back of a more stable risk backdrop. Support remained at 1.0200, but larger stops were reported under the figure. Option related buying under the 1.0230 mark has helped it higher this week, but directional bias into the weekend will come from stocks and commodities. The technical backdrop had shown improvement, but price action has been disappointing into 1.0300, where very sizeable offers are noted.