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By XE Market Analysis April 7, 2015 3:56 am
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    XE Market Analysis: Europe - Apr 07, 2015

    EUR-USD has settled back below 1.1000 after leaving a post-U.S. payrolls high at 1.1035 on Friday, which is nearly three big figures up on levels seen before the release of the jobs reports. The market has now lost clear direction. Expectations that the Fed might delay its tightening to September, if not 2016, has left the dollar somewhat rudderless for now. The euro, meanwhile, should remain better supported (for now) by Greece's promise not to default on the upcoming IMF repayment, though the risk of Grexit continues to loom as negotiations with creditors drag on. USD-JPY, meanwhile, has come to settle in the mid-119s as the dust settles following the post-U.S. jobs report turmoil. The technical picture is mixed after a choppy period of trade. Elsewhere, AUD-USD bolted higher after the RBA refrained from easing at its policy review today. The OIS market had been factoring 70-80% odds of there being a 25 bp easing. AUD-USD clocked a nine-day high of 0.7711.

    [EUR, USD]
    EUR-USD has settled back below 1.1000 after leaving a post-U.S. payrolls high at 1.1035 on Friday, which is nearly three big figures up on levels seen before the release of the jobs reports. The market has now lost clear direction. Expectations that the Fed might delay its tightening to September, if not 2016, has left the dollar somewhat rudderless for now. The euro, meanwhile, should remain better supported (for now) by Greece's promise not to default on the upcoming IMF repayment, though the risk of Grexit continues to loom as negotiations with creditors drag on. EUR-USD support is marked at 1.0900-10. The 20-day moving average is now at 1.7915. Resistance is at 1.1035 (Monday's peak) and 1.1073 (50-day moving average).

    [USD, JPY]
    USD-JPY has drifted higher above Monday's peak to a high so far of 119.75 as the dust settles following the post-U.S. jobs report turmoil. The technical picture is mixed after a choppy period of trade. Expectations that the Fed might delay its tightening to September, if not 2016, has left the dollar somewhat rudderless for now. USD-JPY resistance is at 120.15 (20-day moving average). The 50-day moving average is at 119.49. We still think that the BoJ is on course for an eventual easing while the Fed still remains on course for an eventual tightening, though this bullish USD-JPY view won't have influence over the immediate period ahead. Range trading preferred for now..

    [GBP, USD]
    Sterling should remain on a relatively firm footing against both the dollar and the euro as UK data should continue to show health economic momentum and tightening labour market conditions, though upside potential will likely be curtailed into the May-7 election. The election brings concerns of a hung parliament outcome, particularly as the SNP (Scottish Nationalist Party) could end up holding the balance of power. Cable support is at 1.4870 and 1.4860 (yesterday's low). We favour a test of the post-U.S. payrolls high at 1.4981 and 1.5000.

    [USD, CHF]
    EUR-CHF has established a lower trading range below 1.0500. There have been some analyst notes in circulation highlighting further policy options the SNB has available to try and keep a lid on the franc (including cutting rates deeper into negative territory). The SNB said at its March policy review that the franc is "significantly overvalued and should continue to weaken over time," and that, in a shot across the bows of the market, said it will continue to take account of the franc rate situation in policy decisions and "remain active in the foreign exchange market, as necessary." Both the SNB and SECO cut growth forecasts, factoring in the sharp franc appreciation that was seen in January after the central bank abandoned the 1.20 floor in EUR-CHF. The SNB expects growth of just under 1% this year (down from 2% expected previously) and SECO 0.9% (from 2.1%). Key support in EUR-CHF is at 1.0400-1.0422.

    [USD, CAD]
    USD-CAD has stayed under 1.2500 as crude prices remained over the key $50 mark. The pair has settled lower after peaking last Tuesday at 1.2784. Bigger picture, yield differentials should remain a U.S. dollar positive into 2016 as the Fed remains on course to tighten policy, albeit on a less certain timetable than was envisaged before the March jobs report, weakness in which was more about mean reversion than change of trend. The Mar-17 trend high at 1.2835 and the Aug-2009 high at 1.3063 are bigger picture targets. USD-CAD support is at 1.1429-30.

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