Asia Market Analysis

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Good Morning All;
FX trade was quiet in N.Y. on Thursday, with focus remaining on position adjustments into what will be a long week for many. A weak durables report soured sentiment to a degree, which took Wall Street into moderately red territory. Major dollar pairings were stuck inside of narrow trading ranges. EUR-USD muddled along between 1.1150 and 1.1181, as USD-JPY managed a 112.37 to 112.76 trading band. Softer oil prices again supported USD-CAD, though as prices later recovered, the pairing eased into 1.3245 from highs over 1.3295. Cable recovered on pre-long weekend short covering, following a rough week for the pound.

EUR-USD was range bound through the session, as much of the continent and London left early ahead of a long Easter Weekend. The pairing managed a 1.1150 to 1.1181 trading band, with activity largely focused on position adjustments.

USD-JPY was steady between 112.37 and 112.76 through the N.Y. session, though biased slightly to the upside. Short covering ahead of tonight’s Japan February CPI, where risk is to the downside, and the Good Friday holiday for many, provided the support, though somewhat of a risk-off backdrop limited gains.

The pound closed higher ahead of the long Easter weekend after rebounding from intraday losses amid a short-position clear out. Sterling still remains 2.4% down on the week, affected this week by a revival of Brexit risk following the Brussels attacks and with Moody’s arguing that the economic costs of leaving the EU would exceed the benefits. Incoming opinion polls will be a core focus for sterling markets, particularly to see whether the Brussels drama has had an influence. Three-month implied vols have built on yesterday’s sharp rise, which coincided with the three-months to go date of the Jun-23 referendum. We remain sterling bearish, anticipating Cable to foray once again under 1.4000.

EUR-CHF settled around 1.0900 after leaving a three-week low at 1.0874 yesterday and today. The franc had been bid in the wake of the Brussels attacks, though the Swiss currency had also been moderately bid in the wake of the SNB announcement of unchanged policy last Thursday, which left the sight deposit and mid-point Libor target rates at -0.75%. The SNB used to occasion to stress once again that the currency remains overvalued, and that it will “remain active in the foreign exchange market”. Inflation and growth projections were cut and the implicit easing bias seems to remain in place, although the statement didn’t explicitly state the possibility of further easing.

USD-CAD rallied to seven-session highs of 1.3296, with the combination of weaker oil prices, and a generally soft risk backdrop supporting. The pairing breached its 20-day moving average, currently at 1.3277, though was unable to close above the level, which will limit any technical impact. The 1.3400-05 region will be the next resistance level.

Regards All
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