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By XE Market Analysis April 10, 2014 2:55 am
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    XE Market Analysis: Europe - Apr 10, 2014

    The USD came under pressure against the AUD, which rallied on a stellar Australian jobs report, the JPY, which gained on hawkish sounding BoJ-speak, and the EUR, which extended to a 17-day high of 1.3870 in the early Asia session before settling under 1.3850. In the mix was China's March trade report, where unexpected weakness in exports and a sharp drop in imports fed concerns about economic slowdown. The saw Asia stocks give most intraday gains. Japanese stocks underperformed as the yen strengthened after BoJ's Miyao said that Japan's economic recovery is becoming more broad-based, which further eroded expectations for further monetary stimulus. Japan's machinery orders for February also fell 8.8% m/m, below expectations, and China Premier Li downplayed the need for fresh stimulus. USD-JPY dipped to a low of 101.63, stalling shy of Tuesday's 101.55 low. AUD-USD had made a new four-month peak to 0.9440 following the solid Australian jobs report, which showed a 18.1k headline gain and a dip in the jobless rate to 5.8%, but was knocked back to the 0.9400 area by the China trade numbers.

    [EUR, USD]
    EUR-USD extended to a 17-day high of 1.3870 in the early Asia session before settling under 1.3850. The market had been starting to price in further easing measures, but recent policymaker guidance has been to emphasize that further action is more a possibility than a probability, and this has underpinned the EUR's rebound this week. We continued to take a bigger-picture bearish view of EUR-USD, targeting 1.3500. This view is based on the divergence between Fed and ECB policy paths, with the former having already signalled that a rate hike is on the horizon while the latter is facing a threat of deflation. EUR-USD resistance is marked at 1.3875 and 1.3900.

    [USD, JPY]
    USD-JPY dipped to a low of 101.63, stalling shy of Tuesday's 101.55 low. The yen was underpinned after BoJ's Miyao said that Japan's economic recovery is becoming more broad-based, which further eroded expectations for further monetary stimulus. The 200-day moving average, presently at 101.61, has marked the low on Tuesday and again today, so far. A breach of this and 101.55 would swing March lows at 101.20 into scope. Bigger picture, USD-JPY's recent sharp turn lower after failing to hold levels above 104.00 has reaffirmed the pair's broad sideways range, roughly contained within 100.00-105.00, which has been in place since early January. This stasis may persist for some time, though technical analysts will be marking this as a potential topping formation after the steep rally from levels around 75.0 that was seen during the second part of last year.

    [GBP, USD]
    Cable extended to a fresh high of 1.6820 during the Asia session today following the release of the RICS house price balance for March, which was much stronger than expected with a headline balance of +57%, up from 47% in the prior month. This followed official U.K. production data earlier in the week that had smashed expectations and led to upward tweaks in Q1 GDP forecasts. The high in Cable stalled a couple of pips shy of the Feb-17 major-trend peak at 1.6822. Last week's March PMI surveys had disappointed relative to market expectations, but the data still points to healthy expansion in the economy, while the subsequent release of the more laggard official production data suggests GDP growth may be a little higher this quarter than previously anticipated. We advise taking a bullish view on sterling, and we anticipate a break above 1.0700 over the coming period.

    [USD, CHF]
    EUR-CHF has settled back below 1.2200 again, after making a two-month high of 1.2249 last Friday. The recent up-move reflected an unwinding of the Swiss franc's safe-haven premium, though lower stock markets, persisting geopolitical concerns with Russia, and weak China trade data have reversed this. The cycle low of 1.2104 is a key support, while below 1.2100 the risk of SNB intervention would ratchet up.

    [USD, CAD]
    USD-CAD logged an three-month low of 1.0858 on Wednesday after breaking the Feb-19 low of 1.0910 and 1.0900. Price action has been bearish over the last week, which would be reinforced by a weekly close under 1.0900-10. We would advise some caution, as the Fed vs BoC stance should remain broadly supportive of USD-CAD.

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