2013-05-10 21:30 (UTC)
XE Market Analysis
The dollar added to its recent gains in N.Y. dealings on Friday, taking EUR-USD to 1.2935, and USD-JPY to just shy of 102.00. Yen weakness was interesting, given the G7 this weekend. German Finance Minister Schaeuble confirmed that FX would feature at the G7 and reminded Japan that it promised to take a cautious approach on currency rate issues at the G20. Comments from Schaeuble and U.S. Treasury Secretary Lew on Friday suggest that Japan is still being given the benefit of doubt on policy and most market participants think Japan will avoid overt criticism. However, it is difficult to ignore the persistent yen weakness since late last year, which has boosted stocks, despite assurances from Kuroda & co that Japan is not targeting FX.[EUR, USD]
EUR-USD downside pressure slowed on good support from 1.2980 early on, linked to a sovereign name and a large option expiry at 1.3000. The 200-dma at 1.2992 may provide a sign for next week, as the euro closed the session under the level. EUR bears will want to see a close below to reinforce the downtrend. On the downside, option barriers at 1.2950 which had held since the beginning of April, were knocked out on the pairings drop to 1.2935. There has been light hedging towards 1.2900 for mid-May and 1.2800 also featured sporadically for late May. However, the market is underweight beyond those levels as EUR has only managed to close below 1.2800 once this year on March-27.[USD, JPY]
U.S. name triggered stops in USD-JPY into the N.Y. open on the successful breach of 101.50 barriers. London dealing desks tipped large stops at 101.55 and 101.60 to fuel highs over 101.70. The pairing later peaked just under 102.00, before settling in near 101.50. EUR-JPY extended its rally to fresh three year highs over 132.20 on the flows. The yen sell-off has gained traction into the G7 interestingly. BoJ's Kuroda said he will tell the G7 that easing in April was for domestic purposes and it is not targeting FX rates. Overnight, South Korea raised fresh concerns over yen weakness, while U.S. Treasury Secretary Lew said Japan must respect FX rules as it seeks growth.[GBP, USD]
Cable fell to 1.5315 lows from 1.5425 in morning trade, weighed by the dollar's broad gains. Good bidding into 1.5300 stalled the sell off, and pre weekend short covering took the pairing to 1.5360 into the close. 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 peaked just over 1.0150 after tripping stops at 1.0130. The pairing subsequently eased back under 1.0120 in light trade, though with the weekend at hand, activity slowed. The pairing drifted back to near 1.0100 into the close. Canadian employment rose 12.5k in April (median +11k) after having tumbled 55k in March. The unemployment rate remained at 7.2%, and the data had little impact overall.