2013-05-07 06:07 (UTC)
XE Market Analysis
The RBA rate cut by 25 bps to 2.75% was the highlight in Asia. It cited below trend growth, subdued demand for credit and an historically high AUD. The move forced AUD-USD through key support at 1.0200, which has held since early March and is likely to set the market up for a run on 2013 lows of 1.0115. Also adding weight was press speculation that Soros was shorting AUD after several trades were placed via Hong Kong and Singapore late Monday. Elsewhere, USD-JPY was boosted to 99.45 over the Tokyo fix, where exporter hedging picked up and it turned back to the 98.90 area. An AUD-JPY sell-off from 101.80 to 100.80 weighed on USD-JPY, although increasing expectations that 100.00 will trade soon lifted it back to 99.20 by the Tokyo close. Elsewhere, EUR-USD remained pressured under 1.3100 after yesterday's dovish comments from ECB's Draghi.[EUR, USD]
EUR-USD maintained levels under 1.3100 in Asia after it dropped from 1.3110 to 1.3055 on Monday after ECB's Draghi opened the door open for more easing if needed. More speculation of sovereign support kept the downside in check overnight and it edged up from just below 1.3070 back to 1.3090. In recent weeks, reserve management activity and a rise in risk appetite has kept the EUR supported despite weaker eurozone data and the recent ECB rate cut. However, expectations that ECB are ready to move on rates again could begin to work against the topside. At current levels sellers are likely just over 1.3100 and into the 1.3130 region. Stops are tipped below 1.3050, but bids are lined up towards 1.3000 and below.[USD, JPY]
USD-JPY is relatively stable around the 99.00 region as market participants see increasing risk of another run on the 100.00 area. In USD-JPY's favour is more balanced market positioning after the recent period of corrective action, while U.S. yields remain underpinned and the BoJ are expected to maintain its policy easing stance for the foreseeable future. Bids are noted in 98.80 and 98.50, while offers remain at 99.50 and from 99.70-80. Meanwhile, there was more policy rhetoric from Finance Minister Aso in Tokyo. He warned it would take months for BoJ policy to take effect, adding that monetary policy alone could not fix Japan. He said a new fiscal reform plan would be due around mid-year.[GBP, USD]
Cable was easier in holiday thin trade on Monday. It traded into the 1.5520 region late on in the European session, but is still looking supportive on dips. There has been a notable pick up in demand from fund names after the recent run of better U.K. data, which underpinned expectations that the BoE will remain on hold this week and in June. Range players are likely to buy into 1.5500 and 1.5480, which held last Friday. Note, movement into 1.5600 has met very good sell interest ahead of resistance at 1.5610, protecting a wall of buy stops.[USD, CHF]
USD-CHF is a touch easier after it backed away from the 0.9400 region during overnight trade. Offers are noted just over this level and layered into the 0.9450 region. Dollar buying also ran out of steam after the EUR met good bids ahead of 1.3050 on Monday and this will determine direction during the European morning session. Meanwhile, EUR-CHF edged back into the 1.2260 after it could not sustain a move through 1.2290 during Monday's session. Offers remain in place from 1.2300 and above. Support is seen at 1.2250-60 intra-day.[USD, CAD]
USD-CAD traded in a tight range close to 1.0065 in Asia after it pulled up just short of 1.0100 on Monday. A move higher in stocks kept bias on the USD-CAD downside. However, bids are reportedly heavy into 1.0050 from CTAs, corporate account and option names. This is likely to be the case all the way down to 1.0000, where large outstanding option triggers are noted. Short term offers are noted from 1.0000 and into 1.0120.