2013-05-06 09:58 (UTC)
XE Market Analysis
Ranges were narrow due to today's market holidays in Japan and the U.K. Sentiment remained positive after Friday's upbeat U.S. payrolls report, though there were more negative economic data releases out of Asia. China April HSBC Services PMI slowed to 51.1 from 54.3, which were its weakest levels since the middle of 2011. In Australia, retail sales unexpectedly fell 0.4% in March and job ads dropped 1.3% m/m in April. In Europe, eurozone services sector PMI was revised up to 47.0 from 46.6, retail sales dipped 0.1% m/m and investor sentiment improved to -15.6 in May from -17.3 previously. EUR-USD remained in a holding pattern close to 1.3100 after limited upside momentum, while Cable edged lower to 1.5560 on EUR-GBP demand. USD-JPY benefited after Friday's gains in U.S. Treasury yields and it extended Friday's rally out of 98.00 to trade into 99.45.[EUR, USD]
EUR-USD tracked equity market movement. Early profit taking fueled a EUR dip into 1.3095, where supportive bids were noted from European corporate accounts. The upward revision in eurozone April services PMI encouraged a a move back into 1.3120, where it started the European session. It offered some encouragement for the eurozone after last week's better than expected manufacturing reading. EUR is still caught between ECB rate expectations and appetite for leverage positioning versus USD, CHF and JPY. On an intra-day basis offers should cap into the 1.3140-50 region and larger orders are noted close to 1.3200 after last week's failure just ahead of 1.3220. Meanwhile, there was limited reaction to the eurozone Sentix Investor Confidence reading, which came in at -15.6 in May from -17.3 previously.[USD, JPY]
USD-JPY headed to 99.45 highs. Buying interest was noted out of the 99.10 area at the European open as short term accounts positioned for an eventual push back on the 100.00 region. Last Friday's positive U.S. payroll data underpinned U.S. Treasury yields, while the BoJ policy stance also remains a negative yen influence. Most short term position traders believe USD-JPY has a better chance of successfully clearing out 100.00 barriers after the short period of corrective activity and as asset markets respond positively to central bank stimulus. Expiries should support the pair from 99.00 to 98.80 today, while offers are noted from 99.50 and 99.80.[GBP, USD]
Cable was a little easier in Europe, leaving it just ahead of the 1.5550 region. With the U.K. closed for a public holiday EUR-GBP's move up from 0.8415 to 0.8430 fueled a Cable move from 1.5585 into 1.5560. Overall, it remained supportive throughout after it traded back over 1.5600 on Friday. There was a notable pick up in demand after fundstook advantage of a dip into 1.5480 after U.S. NFP data. GBP has been back in favor over the last week or so on improving forward looking economic data. Near-term resistance at 1.5610 fueled some decent two-way action recently, though the bias is firmly skewed to further upside. There are offers into 1.5630-40 and more option positions are likely into the mid-1.56 region and above.[USD, CHF]
EUR-CHF is supportive after last week's rebound out of 1.2200 back over 1.2250. USD-CHF demand was a significant factor in the upturn. It currently trades around 0.9375 after it was boosted from 0.9300 on Friday following the positive U.S. NFP data. There was tentative EUR-CHF demand out of 1.2270 in early Europe after SNB's Danthine said on the weekend that any changes in monetary policy are highly unlikely, adding that the lower limit in EUR-CHF remains essential. EUR-CHF moved into territory where it has met decent supply in recent sessions from 1.2280 and above. Offers have capped from 1.2300-10 since it pulled back from 1.2349 on April-25.[USD, CAD]
USD-CAD consolidated after it fell to the 1.0075 region on Friday following the U.S. NFP data. Movement slowed around this levels and it chopped between 1.0070 and 1.0080 in Asia. The pick up in commodities and stocks should keep CAD$ elevated in the near-term. Nymex crude extended its rally towards $97 bbl after Israel bombed Syria on the weekend. Bids are still noted into the 1.0050 region, which are protecting good size sell stops below. USD-CAD has not traded for a sustained period into 1.0000 since the middle of February and both corporate names and option account will feature heavily on dips.