Home > XE Currency Blog > XE Market Analysis: Europe - Apr 11, 2014

AD

XE Currency Blog

Topics1211 Posts1231
By XE Market Analysis April 11, 2014 2:56 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 931
    XE Market Analysis: Europe - Apr 11, 2014

    USD-JPY recovered from a three-week low. The symbiotic relationship between the yen and stock markets continued, with Japanese stocks once again exacerbated by the strength of the yen. The Nikkei was dove over 2.5% in what has been the worst week of the Tokyo exchange since June. The fact the global equity sell-off has been tech-led is another factor needling Japanese stocks (the NASDAQ closed 3.1% for the worse on Thursday), while PBoC's Yi didn't help the general tone by saying that Beijing should be cautious in implementing any further stimulus. The extent of Japan's stock underperformance, however, itself became a yen negative during the session, which ultimately helped USD-JPY lift from the 101.41 low back to the 101.70. There were also unsubstantiated rumours of BoJ rate checking. The pair subsequently settled around 101.60. Amid the risk-off backdrop the commodity-bloc currencies came under pressure. AUD-USD sank to 0.9364, just shy of being 100 pips down on Thursday's four-month peak. EUR-USD flat-lined around 1.3890. Economic data today didn't have market bearing. China March CPI met expectations at -2.4% y/y, and Japan's CGPI price gauge for the same month came in at 1.7% y/y.

    [EUR, USD]
    EUR-USD has made a three-week high of 1.3900. Recent ECB policymaker rhetoric has emphasized that further action is more a possibility than a probability, and this has underpinned the EUR's rebound this week, together with general dollar softness in the case of EUR-USD. 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 1.3900 and 1.3966.

    [USD, JPY]
    USD-JPY recovered from a three-week low. The extent of Japan's stock underperformance today (down 2.5%), while in part caused by the yen's strength, itself became a yen negative during the session, which ultimately helped USD-JPY lift from the 101.41 low back to the 101.70. There were also unsubstantiated rumours of BoJ rate checking. The pair subsequently settled around 101.60. 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 has settled in the upper 1.67s after a bullish week with data having confirmed robust economic revival. The RICS house price balance for March was much stronger than expected, while official U.K. production data smashed expectations and led to upward tweaks in Q1 GDP forecasts. 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. The high in Cable this week stalled a couple of pips shy of the Feb-17 major-trend peak at 1.6822, but 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. Lower stock markets, persisting geopolitical concerns with Russia, and weak China trade data have lifted the Swiss currency's safe haven premium. 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 back above 1.0900 after logging an three-month low of 1.0858 on Wednesday. Price action has been bearish over the last week, but we would need this to be reinforced by a weekly close under 1.0900-10. We would advise CAD bulls to exercise some caution, as the Fed vs BoC stance should remain broadly supportive of USD-CAD.

    Paste link in email or IM