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By XE Market Analysis May 5, 2015 3:05 pm
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    XE Market Analysis: Asia - May 05, 2015

    The dollar turned lower in N.Y. trade on Tuesday, as an ugly U.S. trade report weighed. A better than expected services ISM reading was largely overlooked however, while higher yields did not come to the greenback's rescue either. Wall Street moved lower, another USD negative on the session. EUR-USD opened near 1.1115, the lows of the day, before rallying to 1.1223 highs. USD-JPY meanwhile gave back the 120 handle, on its way to 119.73 lows. From highs of 1.2119 after the trade data, USD-CAD tumbled to 1.2003 lows, as oil prices shot up over $61/bbl. Cable found support into 1.5100, before rallying toward 1.5225.

    [EUR, USD]
    EUR-USD posted an intra day high of 1.1223 in N.Y. on Tuesday, getting a boost from the blown out U.S. trade deficit, though it appeared the market was not too interested in pushing the pairing too hard in either direction in the lead-up to Friday's key U.S. jobs report, where questions linger as to whether or not the economy has made it through its Q1 soft-spot, and is on track to improve in Q2. Greece of course, remains at issue, with recent news not sounding too encouraging, as the IMF threatens to withhold an aid package. These factors could end up hemming EUR-USD in for the time being.

    [USD, JPY]
    USD-JPY gave up the 120 handle after a good fight over the past two sessions, managing a three-week high of 120.50 early in the session, before succumbing to the broad dollar-sell-off, and noted Japanese offers lined up to 121.00. The pairing based at 119.74, with the 20-day moving average at 119.56 the next support level.

    [GBP, USD]
    Sterling has underperformed notably over the last two days as markets finally wake up to the sea-change in UK politics that Thursday's general election is set to mark. Polls have consistently put the right-leaning Conservative Party in the lead, but, with 270 seats projected to be won by latest Guardian poll-of-polls projector, is a long way short of the 326 seats needed to form an outright majority. The combined support of the Conservatives and Liberal Democrats, which form the current coalition government, is projected at just 301, while the combined support of the left-leaning Labour and SNP (Scottish Nationalists) parties is 324. The general view is that an alliance of more than 322 MPs could probably survive a confidence vote. However, we still anticipate significant downside risk to sterling as chaotic coalition negotiations loom, which some pundits reckon might last weeks.

    [USD, CHF]
    EUR-CHF has settled on either side of 1.04, after making a one-month high at 1.0508 last week. This came after the SNB last week expanded the number of groups subject to negative rates on deposits at the central bank, though the latest gain has been a natural euro rally. The central bank said at its March policy review that the franc is "significantly overvalued," and would "remain active in the foreign exchange market, as necessary." SNB Chairman Jordan said last Friday that "we will remain active in the foreign exchange market as necessary in order to influence monetary conditions."

    [USD, CAD]
    USD-CAD rallied initially following the sharp increase in Canada's trade deficit, though was quickly offset by the massive U.S. deficit increase. The pairing popped to 1.2121 highs from 1,2090, before fallng back into 1.2060, with next support is seen into 1.2000. Later, USD-CAD met its downside target, basing at 1.2002. The pairing subsequently bounced back over 1.2060, as WTI eased from five-month highs just over $61/bbl, settling near $60.30.

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