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By XE Market Analysis April 9, 2019 3:34 am
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    XE Market Analysis: Europe - Apr 09, 2019

    Narrow ranges have continued to prevail among the dollar majors for the most part, though the Yen, along with the Australian and Canadian Dollars as saw some modest gains. USD-CAD in particular has rotated lows concomitantly with new trend highs in oil prices. Front-month WTI crude prices printed a five-month high at $64.76. Military tension in Libya have been the latest bullish catalyst, which comes amid a backdrop fo OPEC supply curtailment and U.S. sanctions against Venezuelan and Iranian crude exports. USD-CAD has dropped sharply over the last day, and today extended to a fresh low, at 1.3304, which is the lowest level seen since last Wednesday. USD-JPY, meanwhile, has traded with a modest downside bias, which saw the pair carve out a one-week low of 111.28. This was seen against a backdrop of net steady stock markets in Asia, with investors turning cautious despite a fresh trend high being posted by the S&P 500 on Wall Street yesterday, in what was an eight consecutive session of gains and what is the longest uninterrupted rally phase since October 2017. A combo of high valuations, President Trump's threat to tariff European goods, Brexit, expectations for a contraction in Q1 corporate earnings in the U.S., and upcoming trade meetings, due later today, between the EU and China, have collectively given reason for cautious in equity markets. Market participants are also looking ahead to tomorrow's release of U.S. CPI data for March given the Fed's dovish-turn phase has been hinged on a benign inflation outlook. EUR-USD has been consolidation yesterday's Euro-driven gains to the upper 1.1200s.

    [EUR, USD]
    EUR-USD has settled in the mid 1.1200s, making a peak at 1.1261 before pulling back some. The pair has been holding above the 1.1210 low seen in the wake of the U.S. jobs report last Friday, which revealed a blend of strong payrolls but tepid earnings growth, which supported Wall Street but pressured Treasury yields, in turn keeping a lid on the Dollar. Overall, we still see EUR-USD has being in a bear trend, which has been at play since February last year. Support comes in at 1.1176-80 and resistance at 1.1282-85.

    [USD, JPY]
    USD-JPY has traded with a modest downside bias, which saw the pair carve out a one-week low of 111.28. This was seen against a backdrop of net steady stock markets in Asia, with investors turning cautious despite a fresh trend high being posted by the S&P 500 on Wall Street yesterday, in what was an eight consecutive session of gains, which is the longest uninterrupted rally phase since October 2017. A combo of high valuations, President Trump's threat to tariff European goods, Brexit, expectations for a contraction in Q1 corporate earnings in the U.S., and upcoming meetings, due later today, between the EU and China on trade, have collectively given reason for cautious in equity markets. Market participants are also looking ahead to tomorrow's release of U.S. CPI data for March given the Fed's dovish-turn phase has been hinged on a benign inflation outlook. We expect USD-JPY to continue with a downside bias for now. Support comes in at 110.88-95.

    [GBP, USD]
    Sterling is up modestly against the dollar and most currencies on the week so far, finding a footing and taking a tumbled over the last couple of days last week. Cable has lifted back above 1.3050 to put in some distance from Friday's 10-day low at 1.2987. UK Prime Minister May, and team, will again today be meeting with Labour's Corbyn, and team, amid ongoing efforts to find a cross-party compromise on Brexit. The potential compromise that May and Corbyn appear to be working on is one that would take the form of May's Withdrawal Agreement plus a guarantee the UK would remain in the EU's customs union in the future, which would both satisfy Labour demands while obviating the need for an Irish backstop. If the talks succeed, then the UK would be set to leave on May 22, ahead of European Parliament elections on May 23. If the talks fail, May has committed to putting in a series of Brexit options to Parliament. If these options in turn fail to produce a consensus, then a referendum or general election may be the only viable ways forward. May will be travelling to the continent today for meetings with Germany's Merkel and France's Macron. She is then due to appear at the EU's emergency Brexit summit tomorrow. As things stand, the UK is due to exit the EU on Friday, April 12, at 23:00 London time without a deal in place. We, and judging by the stability of the pound, markets, don't expect a no-deal to happen; Parliament isn't countenancing it, while Brussels can be expected to be flexible, so long as the UK persuades it that there is a way forward and there isn't a "permanent standoff" in Westminster.

    [USD, CHF]
    EUR-CHF has settled above 1.1200 after rebounding last week from the eight-month low seen in late March at 1.1162. The rotation higher reflected broader Euro gains. SNB member Maechler said last week that while the Swiss economy remains dynamic and the global economy should remain solid, inflation pressures remain very weak and the environment is fragile, which continues to warrant expansionary monetary policy. The EUR-CHF cross has been seeing choppy directional impulses since the start of the year, often times characterized by bouts of pronounced underperformance in the Swiss franc that have often been accompanied by talk/suspicions of SNB intervention.

    [USD, CAD]
    USD-CAD has rotated lower concomitantly with new trend highs in oil prices. Front-month WTI crude prices printed a five-month high at $64.76. Military tension in Libya have been the latest bullish catalyst, which comes amid a backdrop fo OPEC supply curtailment and U.S. sanctions against Venezuelan and Iranian crude exports. WTI benchmark oil prices are now up by nearly 42% on the year-to-date, which, if sustained, will be a notable benefit to Canada's terms of trade. USD-CAD has dropped sharply over the last day, and today extended to a fresh low, at 1.3304, which is the lowest level seen since last Wednesday. More of the same looks likely. Resistance comes in at 1.3335-38.

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