2013-04-29 10:42 (UTC)
XE Market Analysis
European markets focused on Italy after quiet Asian trade amid public holidays in Japan and China. EUR-USD posted a modest rally after Italy formed a government and refinancing costs fell at today's bond auction, but the interest rate outlook in the eurozone limited buying momentum ahead of this week's ECB rate announcement. Cable continued to benefit from last week's U.K. preliminary Q1 GDP reading and it cleared option barriers at 1.5500 in Asia and extended towards 1.5550 in Europe. USD-JPY drifted back towards 98.00 in Europe after it hit 97.35 lows in Asia. Demand for the JPY-crosses was a major source of influence as USD-JPY flows were more limited with Tokyo closed for today's market holiday. The only economic data release of note was the eurozone ESI confidence reading, which came in at 88.6 in April from 90.1 in March.[EUR, USD]
EUR-USD firmed up as intra-day accounts key off developments in Italy in the absence of other leads. A large European account was a standout buyer from the 1.3065 into 1.3100 after smaller interbank types were early buyers from the 1.3050 region. EUR gains are likely to meet selling pressure ahead of the ECB policy decision, where expectations has increased for a rate cut following recent data weakness. On an intra-day basis, a better risk backdrop could squeeze the EUR through 1.3100, but sellers out of the Middle East are tipped into the 1.3130 region, where EUR topped out on April-19.[USD, JPY]
USD-JPY steadied after it corrected to 97.35 in Asia on stops in thin trade. Movement was exacerbated due to public holidays in Japan and China. During the European morning the dollar pairing firmed up from 97.65 to 97.95 on JPY-cross demand. EUR, GBP and AUD experienced modest demand on dips as stocks headed higher and this kept USD-JPY stable. USD-JPY momentum may be limited than usual over the course of the week due to Japan Golden Week holidays, but yen positioning is likely to be more broadly balanced since the correction from the Y100 region and could bode well for speculative outflows in the medium term.[GBP, USD]
Cable broke the top of the range in Asia after 1.5500 barriers gave way. The underlying tone shifted dramatically to the topside after last week's better than expected preliminary Q1 GDP data, which reduced expectations of BoE policy stimulus. After moving to 1.5525 in late Asia buyers took it up to 1.5545 after BoE's McCafferty said for some the economy has been healthier than headline figures suggest. Sources tip more outstanding barriers at 1.5550 and there is good resistance at 1.5570-75, which includes the 100-dma at 1.5573 and more option positions.[USD, CHF]
EUR-CHF held on to a tight range close to 1.2300. Activity was isolated to early EUR and GBP positioning, which was offset by USD selling. European stocks posted early gains after Italy formed a government, but overall there were limited developments to focus on. USD-CHF moved under 0.9400 after it lost ground from 0.9420 at the European open, which compared with last week's highs around 0.9500. EUR-CHF is in consolidation mode after it pulled back from 1.2349 highs last Thursday. However, since it rallied out of levels under 1.2200 short term accounts are comfortably buying dips. Support is noted from 1.2275-80 and towards 1.2250, while layered offers are noted from 1.2320 into 1.2350 barriers.[USD, CAD]
USD-CAD extended losses through 1.0150 as the commodity bloc currencies benefited from a pick up in risk appetite during the European morning. USD-CAD started the session on the heavier side after stale longs bailed out of positions last Friday, which sent it to lows under 1.0160. During today's session short term players adopted a strategy of fading upticks and it headed to 1.0136 lows just ahead of the North American open. April-14 lows around 1.0135 should fuel light demand and there are support points at 1.0125-30, where corporate hedging may go through.