2013-05-14 19:56 (UTC)
XE Market Analysis
The dollar firmed in N.Y. trade on Tuesday, despite the return of risk taking. Stocks rallied on the back of Fitch's Greece upgrade, and talk of a new Japanese growth package in the works. Treasury yields were higher, which helped the dollar, though it appears the greenback maybe reacting to the improving U.S. growth picture. EUR-USD touched lows near 1.2930, after peaking near 1.2995, while USD-JPY reclaimed the 102 handle, topping out over 102.30. The economic calendar was light, with just April import and export prices on tap. The data were close to expectations, and had little market impact. Wednesday's U.S. calendar picks up with April PPI, the May Empire State index, March TIC flows, April industrial production, the May NAHB housing market index, and weekly EIA petroleum inventory data.[EUR, USD]
EUR-USD was weighed by model fund selling into the N.Y. open. Interest picked up and carried the pair just through 1.2950. Talk of an Asian sovereign bid surfaced, while there were some intra-day types, that played the range, coming back into the market in anticipation of very strong demand from 1.2935. Most of the option expiry risk for EUR-USD suggests supportive interest from option names. Larger than average strikes were noted at 1.2950, 1.2975 and 1.3000. Later in the session, the pairing moved decisively through 1.2950, touching 1.2930 lows. Buyers returned quickly under 1.2940. Fitch's upgrade of Greece had little impact on the euro, and in fact, the unit fell to its lowest levels of the day after the headline crossed.[USD, JPY]
USD-JPY moved comfortably above 102.00, peaking over 102.30 in early afternoon trade. Firmer yields, and a generally stronger dollar helped the pairing higher on Tuesday, though option expiries coming up later this week at 102.50 could see it stabilize for the time being. Japanese exporter offers are in place over the level as well.[GBP, USD]
GBP continued its steady decline. Cable sellers were persistent since it failed to retake 1.5300 after the N.Y. open. European selling picked up from the ECB fix and a French name reportedly had a standout interest. EUR-GBP's move up through 0.8500 overnight was a negative lead and it recently cleared overnight highs around 0.8505 and extended through 0.8515. Clearly, market positioning ahead of tomorrow's BoE Inflation Report is to the downside amid the breakdown since yesterday's London close and the recent pick up in speculative shorts. There are better support levels should Cable approach 1.5200. However, London names are wary of more losses given the collapse in thin conditions after yesterday's close.[USD, CHF]
EUR-CHF was steady close to the 1.2400 in London, though picked up dramatically in N.Y. trade, The cross moved briefly over 1.2500 before settling a touch lower. After a small correction from 1.2450-60, buyers stepped back into the cross. The underlying tone is still skewed to higher levels after last week's break higher and it is possible that EUR-CHF will maintain a better tone until the next SNB meeting on June-21. USD-CHF meanwhile, took off higher after breaking the 0.9600 level, and moving over 0.9660, levels last seen last September.[USD, CAD]
USD-CAD touched session highs over 1.0140 in early North American trade, after finding support under 1.0100 in Asia overnight. An empty Canadian, and light U.S. calendars kept the market focused on risk levels and commodity prices, where stocks rallied and oil prices recovered some. USD-CAD gains were capped below noted 1.0170 offers, though despite firmer equities, and the paring of oil price losses, it remained near session highs. Light stops were reported at 1.0180, though sources said larger buy orders are building at 1.0210.