2013-05-13 18:49 (UTC)
XE Market Analysis
Aside from a brief uptick following weak, but better than expected U.S. retail sales, the dollar was fairly steady in N.Y. trade on Monday. EUR-USD fell toward 1.2940 from 1.2980, and USD-JPY popped briefly over 102.00, though these moves were quickly reversed. Activity was light from the London close, as stocks wallowed in narrow ranges, marginally under water through most of the session. Cable underperformed, losing ground under 1.5280, after breaching the April 25 low of 1.5325. Tuesday's U.S. calendar will be light, with just import and export prices data on tap.[EUR, USD]
EUR-USD dipped to session lows near 1.2940 from opening levels near 1.2985 after the weak, but better than expected U.S. retail sales data. Buyers were waiting in the wings under 1.2950 however, which quickly resulted in a pop to new session highs of 1.2990. Afternoon dealings were uneventful, with the pairing stuck between 1.2960 and 1.2980. 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.[USD, JPY]
USD-JPY options are expected to influence after the Asia move on new trend highs of 102.15. Option market sources claim that the USD-JPY road higher may be a more difficult one. Option barriers at 102.50 and 103.00 are reportedly larger than previous exposure at 100.00, which capped for several weeks before USD-JPY broke higher. Most of the barriers up to 103.00 are reverse knock out positions, which are deep in the money 95.00 to 98.00 strikes that are due to expire in the week leading up to May-31. This suggests that profit taking and persistent option related hedging will be a feature on the USD-JPY topside. Note, today's N.Y. cut includes large size 101.50-60 strikes and outstanding 102.00 maturities. U.S. trade saw USD-JPY take out 102.00 briefly, though it settled in under the figure through the remainder of the session.[GBP, USD]
Cable found buyers into 1.5335, leaving it just ahead of 1.5350, where it has traded for a large part of the session. Offshore names have been building GBP long positions since the European open as optimism over the U.K. economy picked up in the weekend press. There are expectations that this week's BoE Inflation Report could include an upward revision in growth. However, U.K. banks are still mostly short of GBP, according to sources. Cable found support into 1.5275 in N.Y., after sellers stepped in on the breach of earlier lows of 1.5335, and Friday's low of 1.5325. U.K. names reportedly led the charge, though the April 25 base of 1.5265 should provide support for now.[USD, CHF]
CHF edged lower after the unexpected decline in Swiss retail sales. EUR-CHF moved back toward 1.2440 after 1.2400 held in early trade. Local name order flows forced an early move from 1.2440 as offers held at 1.2450 in Asia. However, the underlying tone is still skewed in favour of the topside after last week's break to 1.2460 highs. SNB policy speculation picked up pace last week after disappointing inflation numbers and triggered heavy topside hedging via EUR-CHF. Meanwhile, USD-CHF has also benefited from the wider dollar uptrend and and broke the top of the long-term range on Friday at 0.9550-70 is trading a tight range close to 0.9600 today.[USD, CAD]
USD-CAD found support into 1.0080, after tripping stops under 1.0100 earlier. Noted bids into 1.0070 provided support, while London short covering and softer equity and commodity prices resulted in a move back over 1.0110. Offers are in place from 1.0140, and may put a cap on things through the overnight session on Tuesday.