2013-05-24 10:56 (UTC)
XE Market Analysis
Sentiment in Europe was more stable today after the Nikkei posted a late rebound on talk of price smoothing operations, though it experienced another very choppy session. Overall, markets remained nervous and the tone turned defensive into the N.Y. open, which fueled a stop hunt on the USD-CHF downside through 0.9600 and EUR-CHF tumbled from 1.2550 back to 1.2465. EUR-USD held steady ahead of 1.2950 throughout the European morning, aided by better eurozone data, which included a jump in the German Ifo. Cable mirrored EUR movement for the second session and headed above 1.5130. USD-JPY was fairly static around 101.50 for the most part, having traded between 101.08 and 102.58 since the Asia open.[EUR, USD]
EUR-USD headed to session highs close to 1.3000 after the German Ifo jumped in May. The EUR, which had started the session on a stable footing, moved up from the 1.2925 region. The run higher received positive traction from EUR-CHF and EUR-JPY demand on dips. However, the cross flow ran out of steam as European stocks gave back early gains and ended the European morning in negative territory. EUR-USD may still be ripe for a squeeze up through 1.3000 offers as the USD continues to work off some of the recent excess, but the crosses may struggle to sustain direction after the price chop over the last two sessions.[USD, JPY]
USD-JPY remained stable in Europe. Stocks performed better after a difficult trading environment in Asia. The Nikkei ended the session 0.89% higher, with prices surging more than 4% in the last 30 minutes of trade amid speculation of official price keeping operations, though it had been more than 3.5% higher in the Tokyo morning. USD-JPY is currently trading close to 101.50, having traded as low as 101.08 in late Asia. After the European open it traded just over 102.10, but lacked impetus to retest early Asian highs of 102.55-60. Our Japanese sources said that the uptrend is still intact, but expect exporters that missed the pace of the move to increase their selling interest. Quite a number of corporates were holding fire due to forecasts above 105.00, though this strategy could change given the price swings this week.[GBP, USD]
Cable was close to 1.5100 in quiet trade. Intra-day movement was tied to stock market moves and repositioning via funding currencies. It found support from 1.5065 in Asia and reached 1.5130 late on in the European morning. Overall, direct GBP flows were lacking. Comments from BoE Fisher did not have a direct market influence, though he said another rate cut probably would not boost demand and also questioned whether negative interest rates would have an impact. There is some expiry risk for Cable as the session progresses amid 1.5050 and 1.5100 maturities. Bids are tipped at 1.5050 and 1.5015 ahead of the psychological 1.5000 level, where barriers are reported. From a big picture perspective Cable has tended to meet good buying interest into 1.5000 since the BoE highlighted the consequences of sterling weakness back in March. We think this will encourage demand from corporates, offshore investors and sovereign names on dips.[USD, CHF]
EUR-CHF has been supported on dips since yesterday's N.Y. session as stocks got a fillip on more encouraging U.S. data. In Asia, markets were choppy and risk appetite suffered on more volatility in Japanese markets. Talk of official buying lifted the Nikkei into positive territory into the close and set Europe up for a decent start, which gained momentum after encouraging eurozone data. However, leverage accounts were forced to cut swissy short positions as European stocks fell late on in the morning, leaving the cross under 1.2500 after offers at 1.2550 capped in Asia and Europe.[USD, CAD]
USD-CAD consolidates over 1.0300 after it reversed course after 1.0400 held during Thursday's Asian session and during the European morning. It faded to 1.0285 by the North American afternoon as sentiment in the U.S. was broadly positive overall. However, stocks remained choppy in Asia and Europe today, which restricted the upside in CAD$ and fueled USD bids from the 1.0320 area. More support is noted into 1.0300 and 1.0280 from short term accounts, though stocks are likely to drive action into the weekend.