2013-05-09 07:11 (UTC)
XE Market Analysis
The dollar consolidated in Asia after it regained some of its poise during Wednesday's N.Y. afternoon session. EUR backed away from 1.3200 as good offers held and headed back towards 1.3150, where it traded for the most of the Asian session. Cable also retreated from 1.5600 and sits below 1.5550 ahead of today's BoE policy decision, where a steady hand is widely expected. The highlights in Asia came once again from China, Australia and New Zealand. China CPI rose 0.2% m/m and 2.4% y/y, which was higher than expected and is likely to keep the PBoC on hold for the time being. Australia April employment posted a healthy 50.1k rise and the unemployment rate fell from 5.6% to 5.5%. NZ employment also beat expectations at 1.7% in Q4, leaving the Q1 unemployment rate at 6.2% sa from 6.8% in Q4.[EUR, USD]
EUR-USD started the session close to 1.3150, but did not trade higher than 1.3167 in Asia after large offers held at 1.3200 on Wednesday. EUR-JPY's heavier tone kept the upside intact throughout, though downside pressure is reportedly being absorbed by reserve management activity. The EUR was buoyed yesterday after more German data strength, which suggests that Germany may have overcome its soft patch. Various comments from ECB officials also indicate that plans to reinvigorate the ABS market are being considered in order to fuel more lending to SMEs.[USD, JPY]
USD-JPY continued to struggle into 99.00 and above despite some early buying interest. Specs have reduced excessive positioning in recent sessions and Japanese corporates on both sides of the market have tied ranges up. It headed back to 98.70 by the time Tokyo closed, leaving it close to decent Japanese bids around 98.50-60 that have underpinned since the start of the week. However, yen selling has lost some its intensity. The BoJ have eased policy and are likely to digest the impact from the new asset purchase scheme before shifting again. There are also very heavy outstanding 100.00 barriers that are still intact, which has encouraged hedging from lifers and exporters that want to lock current levels. Until these flows run their course USD-JPY may be a range trade.[GBP, USD]
Cable is in a holding pattern close to 1.5550 ahead of today's BoE policy decision. It made another run on 1.5600 on Wednesday, but fell just short of resistance at 1.5600-10 and corrected lower by the N.Y. close. Cable's proximity to 1.5600 and the potential for a steady policy hand from the BoE raises the risk of a sustained push higher. CFTC data revealed that some positions were cut back last week, but on an historical basis there are a significant number of net shorts. Over 58k remained as of last Tuesday. It wouldn't surprise us to see another reduction in short positioning when the latest data is released and the correction could accelerate if a series of resistance levels are cleared away between 1.5640 and 1.5690.[USD, CHF]
EUR-CHF consolidated the recent rally and settled close to 1.2300 after 1.2350 barriers held again. The EUR-CHF tone is still skewed to higher levels after this week's marked pick up in topside strikes from 1.2300 up to 1.2500. Local name bids have kept the cross underpinned from 1.2270-80 and more bids are noted into 1.2250. Offers on the topside are related to outstanding barriers and there is more long-term resistance into 1.2370.[USD, CAD]
USD-CAD remained inside a narrow range as it inches towards outstanding option barriers at 1.0000. During the Asian session it bumped again 1.0020 support, but could not overcome option related flows and edged back over 1.0030 by the European open. At current levels the risk backdrop should determine where USD-CAD goes, however, the 1.0000 level is going to be difficult to overcome, with corporate names and CTAs also active on dips. Offers are noted between 1.0040 and 1.0050 and then into the 1.0080 area.