2013-05-15 05:54 (UTC)
XE Market Analysis
The dollar maintained firmer levels and moved to fresh highs in early trade as market participants continue to focus on the improving U.S. growth outlook. EUR moved into 1.2910 on hedge fund selling, but EUR-cross demand kept it underpinned ahead of 1.2900. JPY consolidated at weaker levels after yesterday's report that PM Abe was set to announce a growth strategy on Friday. When the report broke USD-JPY headed to new trend highs over 102.40, but two-way action picked up over the course of the Tokyo session. AUD continued to trade under pressure close to 0.9900 after it broke lower after yesterday's Australia federal budget. There are still concerns locally over the China outlook following recent data releases. China Premier Li also said admitted that the economy was under pressure, but there was little room for stimulus.[EUR, USD]
EUR-USD was weighed by eurozone GDP data, leaving it under 1.2900. The early reading from France and Germany forced EUR lower, though losses were contained by European corporate interest and central bank commercial demand. Eurozone Q1 GDP contracted 0.2% q/q, which was weaker than expected, but the impact was limited as ECB have already cut rates and policy will remain accomodative. EUR upticks towards 1.2930 and 1.2950 should meet selling pressure, particularly with the USD maintaining a broad based bid on market sensitivity to Fed QE tapering talk. Near-term risk is skewed to a sustained move on 1.2800 and below. Note, EUR has only managed to sustain a close under 1.2800 once this year on March-27.[USD, JPY]
USD-JPY broke 102.50 barriers amid early European account interest reportedly on behalf of the hedge fund community. So far, corrective action is limited as market participants position for a move up through 103.00 ahead of PM Abe's growth strategy announcement, which is tipped for Friday. Large 103.00 barriers are set to roll off at Friday's N.Y. cut, but vols have taken off as option accounts hedge for further upside risk. Exporters are also aggressively hedging on a 102 handle in anticipation of large option related dollar supply. Buyers are tipped from 102.00 to 101.80 and towards the 101.50 region.[GBP, USD]
GBP shorts booked profit over the BoE Inflation Report. A more upbeat tone from BoE Governor King lifted Cable to intra-day highs just over 1.5270 and EUR-GBP pulled back below 0.8450. The market was positioned short into the release and GBP was always more likely to rise. However, prices aren't running away as market participants digest the BoE's outlook. The BoE raised GDP forecasts and lower the inflation outlook, which was widely tipped in the weekend press. Earlier on, GBP benefited on U.K. jobs growth. Cable traded briefly over 1.5250, which compared with early lows just under 1.5200. The dip in the claimant count was welcomed, but average earnings remained soft and the ILO three month jobless total rate rose 15k.[USD, CHF]
USD-CHF strength buoyed EUR-CHF. The dollar pairing was boosted from 0.9650 in early Europe to trade up through option barriers at 0.9700, which fueled EUR-CHF buyers from 1.2470 to 1.2525. The cross was supportive immediately from the European open after it traded over 1.2500 for the first time since late January after Tuesday's European close, which follows a period of more pronounced swissy weakness. Some market participants are starting to consider whether SNB could be forced to do more in its bid to overcome deflation and this has kept the cross supported since it cleared 1.2300 in late April. It is possible that EUR-CHF will maintain firmer levels now until the next SNB meeting on June-21. EUR-CHF longs target the previous peak at 1.2573, while USD-CHF is skewed to a run on 0.9970-1.0000.[USD, CAD]
USD-CAD extended gains to clear out offers at 1.0200 and buy stops at 1.0210. The downturn on CAD$ reflected ongoing pressure on the commodity market and general USD strength. Buyers kept the downside intact from 1.0180 and more bids are noted at 1.0170 and 1.0150 intra-day amid the bullish technical backdrop. Longs are homing in on resistance at 1.0230 and daily highs from late April between 1.0255 and 1.0285.