2013-05-10 10:43 (UTC)
XE Market Analysis
The dollar extended gains following Thursday's sharp rally, which came on several factors. A real money name bought against a basket of currencies, Fed QE tapering talk resurfaced after jobless claims data and there was speculation that China may increase dollar reserve holdings. The U.S. market is going to show sensitivity to Fedspeak today after QE tapering talk picked up. The G7 meeting in the U.K. is not expected to be a major market mover, but given USD-JPY's rise overnight Japanese policy may feature in the headlines.[EUR, USD]
EUR-USD was weighed by the strong dollar bid and broke 1.3000. Selling was mainly from specs that keyed off yesterday's significant dollar break of range, which was noted against several currencies. A supranational account was also active between 1.3040 and 1.3050 and fueled talk of SNB hedging after EUR-CHF soared. Support for EUR-USD into 1.3000 came from an Asian sovereign and there are also range types covering shorts into the 200-dma at 1.2992 and strong bids at 1.2980, 1.2970 and 1.2950.[USD, JPY]
USD-JPY made a run on 101.50 barriers after European session opened. Model funds and momentum accounts piled into the dollar after Thursday's break of 100.00 triggered strong gains. MoF weekly flow data reinforced the uptrend after net buying of overseas assets was revealed and heightened speculative yen selling, which spilled into the crosses. Dollar buyers of note included heavy fixing demand from Japanese importers, as well as flows related to exotic option structures that were cleared away in the last 24 hours. Offers at the USD-JPY highs over 101.40 include option protection ahead of 101.50 barriers and Japanese orders into long-term resistance at 101.45.[GBP, USD]
Cable longs were stopped out under 1.5400 amid dollar strength. The bias for Cable is likely to remain on the downside given the intensity of dollar buying. However, renewed optimism over the U.K. outlook could fuel fresh long positioning towards support levels at 1.5380 and 1.5370 once this clear out has run its course. U.K. data was a side issue for FX traders as the focused remained on repositioning.[USD, CHF]
EUR-CHF was buoyed by USD-CHF strength. The dollar pairing was ramped up by spec funds from 0.9475 over 0.9580 following the heavy real money bid on Thursday. EUR-CHF gained positive traction after it started the session above 1.2350 and extended to the 1.2460. The persistent bid in EUR-CHF this week coincided with strong topside hedging amid speculation that the SNB could be forced to do more to overcome deflationary headwinds.[USD, CAD]
USD-CAD is closing in on 1.0100 on follow through dollar buying in Europe. Option related support and general dollar strength fueled a move up from 1.0020 during the North American afternoon session. Buy stops are under threat behind 1.0100 and larger buying will pick up if 1.0125-30 gives way. Bids are noted from 1.0070 and 1.0060.