2013-04-22 19:49 (UTC)
XE Market Analysis
The dollar was mostly lower in N.Y. trade on Monday, though activity overall was quite subdued. EUR-USD based under 1.3020, managing to move toward 1.3060 into the close, as equity market sentiment improved. USD-JPY dipped breifly under 99.00 after again failing to breach the 100.00 mark. U.S. existing home sales data was a tad softer than expected, as was the Chicago Fed index. The housing data appeared to have weighed on USD-JPY to a degree, though had little lasting impact elsewhere. Tuesday's U.S. calendar picks up with flash Markit PMI data, new home sales, and the Richmond Fed index.[EUR, USD]
EUR-USD downside progress was slowed into 1.3000 amid ongoing talk of increased interest from reserve managers on dips and corporate hedging activity. The brief move under 1.3020 reportedly met a large sovereign name, which lie ahead of last Wednesday's 1.3001 low. EUR-JPY's limited movement around 130.00 is also keeping interest low. The slow down in cross activity was attributed to a 130.00 option strike that is rolling off today. There are also several strikes rolling off in EUR-USD, but these are scattered at fairly frequent intervals between 1.3000 and 1.3120 and unlikely to have much influence today. EUR-USD bounced back toward 1.3050 in afternoon trade, as risk appetite picked up marginally.[USD, JPY]
USD-JPY steadied after a mini shake out, which followed U.S. housing data and the general risk off tone. Stops under 99.45 fueled a quick move just below 99.00. There were several names out of London involved, which suggested position squaring ahead of the close. U.S. interbank types bought the dip, with short term players still more confident that 100 will print this week now that the G20 meeting is behind us and ahead of the BoJ policy decision on Friday. There are 100.00 maturities rolling off (plain vanilla and exotics) on Wednesday, Thursday and Friday. There are well over USD 2 bln expiring on Thursday, which is the main expiry day for this level and more short dated JPY puts traded at 100.00 for Thursday today. Specs may look to push for stops through 100.00-20 ahead of Friday's BoJ decision, where a steady policy outcome is widely anticipated after the bold policy move on April-4.[GBP, USD]
EUR-GBP pressure supported Cable. It threatened 1.5200 in Asia and then in early Europe, but never looked like breaking lower as EUR-GBP supply from a central bank name went through. The cross tumbled from 0.8590 in early Europe and headed to below 0.8550 after the N.Y. open. A large part of the cross move since the N.Y. session opened is due to EUR-USD weakness, with macro funds positioning for extended downside moves in the weeks ahead. There are growing expectations that the ECB will be forced to cut rates on more economic data weakness. For Cable, the outlook is negative after Friday's weak close, but it has not spent a sustained period of lower levels since BoE Governor King and other MPC members talked up the pound to lift it back over 1.5000 in mid-March. In the very near-term Cable movement between 1.5270 and 1.5300 should meet selling pressure.[USD, CHF]
EUR-CHF is supportive after it rallied to one-week highs around 1.2205. The pick up in risk appetite on Friday, along with EUR-JPY demand provided a positive lead. However, EUR-USD is still struggling to sustain higher levels today, largely due to poor economic fundamentals in the eurozone, which is increasing expectations of a potential ECB rate cut. ECB officials have said in recent sessions that a rate cut is a possibility if incoming data supported a move. This is capping EUR-CHF's ability to clear good size offers from 1.2200. SNB's Jordan maintained his support for the EUR-CHF lower limit at the G20, adding that other nations don't question the EUR-CHF cap. The easier EUR-USD tone has lifted USD-CHF to 0.9350, but further gains may be limited amid increasing talk of central bank reserve diversification from Asian accounts.[USD, CAD]
USD-CAD perked up slightly in early North American dealings, topping 1.0270 after opening around 1.0250. The pairing remains firmly ensconced inside of familiar ranges though with 1.0200-1.0200 holding for nearly a week. Bids are reported from 1.0240, with offers from 1.0280, making it more likely an uneventful CAD session may be in store. Later, USD-CAD gains were capped by offers from 1.0280, keeping the pairing to a 1.0285 high. Option backed sellers were noted into the highs, while talk of corporate buying interest was heard early on from 1.0250.