2013-04-26 07:43 (UTC)
XE Market Analysis
Consolidation has set in across the FX market after mixed Asian equity market performance overnight. The macro picture has influenced in the last couple of sessions. Rising expectations of an ECB policy move next week has fueled EUR selling pressure on upticks. However, Asian reserve management flows have been relatively heavy this and EUR pullbacks met strong demand. Another record PBoC CNY fix fueled expectations that more money may flow back into EUR and AUD during today's session. Meanwhile, Cable is trading on a robust footing after it surged to 1.5380 on Thursday after a better than expected U.K. GDP release. Movement into 1.5500 is being stymied by an outstanding 1.5000-1.5500 range binary. Meanwhile, JPY is on a firmer footing after the BoJ policy outcome was in line with expectations. Today's influence is likely to come from the U.S., where Q1 advanced GDP is due, along with consumer sentiment.[EUR, USD]
EUR-USD found support from the 1.3000 level in early trade. Expectations of more sovereign demand kept it underpinned in Asia and it squeezed to 1.3050 in thin trade. Further gains were hampered by EUR-JPY's pullback from the 129.40 region to 128.60, which accelerated to 128.10 by early Europe. EUR is still likely to meet selling pressure on upticks as market participants eye a potential ECB policy move next week following a run of weak eurozone data. On an intra-day basis there is likely to be good offers from 1.3080 to 1.3100. Under 1.3000 there is support from 1.2880 down to 1.2850.[USD, JPY]
USD-JPY and the JPY crosses were soft into the BoJ announcement as specs reduced positions amid expectations of a steady policy hand. The BoJ reiterated it would expand the monetary base by Y60-70 tln annually, but did not release any forecasts on growth or CPI. USD-JPY traded into 98.60 from 99.40 into the decision. Stops under 99.00 exacerbated the sell-off, although the pair squeezed back into 99.20 once the decision was released. Thereafter, it met selling pressure on upticks and reverted to the 98.50 region, where another batch of stops carried it to 98.25.[GBP, USD]
Cable is consolidating gains after Thursday's surge out of 1.5290 to 1.5480 after better than expected U.K. GDP data. The number is likely to keep the BoE on hold in May and possibly June, which is the last meeting for current BoE Governor King. There are some expectations of further easing when Carney takes the reins, but MPC members may be inclined to wait on the impact from the extended FLS scheme, which was announced on Wednesday. During today's session corrective action is noted as outstanding option barriers at 1.5500 weigh. However, we think that dip buying should continue after the welcomed surprise in growth on Thursday. Buyers are noted into 1.5400-20 and more bids are tipped at 1.5380.[USD, CHF]
EUR-CHF stalled ahead of 1.2350 barriers and headed back to the 1.2280 region. Interest is noted mainly from local names, though the underlying tone is still skewed to higher levels. The topside break on Tuesday over 1.2250 fuels buying interest on dips. However, the increased move out of the CHF is being exacerbated by speculation that SNB will raise the lower limit in EUR-CHF from 1.2000 to 1.2500. SNB policy rhetoric does not suggest that this is in the pipeline and upward momentum may run out of steam once this risk passes. The KoF leading indicator came in at 1.02 versus expectations for a 0.98 outturn, while the March reading was revised up to 1.00 from 0.99 previously.[USD, CAD]
USD-CAD is trading close to 1.0200 after it finally managed to move under the 1.0200 mark on Thursday, posting a low near 1.0185. Stops were a factor at the figure, and a Canadian name reportedly was a good seller from 1.0210. Downside is contained by corporate demand though after yesterday was the first time on the 1.01 handle since April 12. Bids are noted in size into 1.0180. Offers are now likely from 1.0230-40, where support was previously noted.