Home > XE Currency Blog > XE Market Analysis: Europe - Apr 15, 2014

AD

XE Currency Blog

Topics7223 Posts7268
By XE Market Analysis April 15, 2014 5:01 pm
    XE Market Analysis's picture
    XE Market Analysis Posts: 5147
    XE Market Analysis: Europe - Apr 15, 2014

    The dollar majors have seen narrow ranges during pre-European trade in Asia. China lending figures pointed to a slowing economy, which weighed on China and Hong Kong stock markets, but had little impact on currencies (and nor most other stock markets in the region, which rose on the coattails of Wall Street rally on Monday), aside from causing some minor weakening in the AUD. Sterling softened slightly, with Cable dipping to 1.6711 from the 1.6725 region and EUR-GBP ticking fractionally higher, following an unexpected drop in U.K. BRC retail sales of -1.7% y/y in the like-for-like headline (+1.0% had been the consensus). AUD underperformed following the release of the RBA minutes to the April policy review, which noted that the AUD was still high by historical standards and that the exchange rate will be less supportive of the economy than before, although the overall tone was quite positive and said that interest rates would remain steady for a prolonged period. AUD-USD dipped to 0.9385 from the 0.9420 area, but remained above yesterday's 0.9376 low. Some commentaries also attributed the Aussie's softening to a liquidity draining operation in China today, in addition to the China credit report. Elsewhere, EUR-USD flat-lined around 1.3815-20 and USD-JPY posted a narrow 101.81-101.99 range.

    [EUR, USD]
    EUR-USD flat-lined in Asia around 1.3815-20, consolidating after declining quite steeply following remarks from ECB President Draghi, who over the weekend said that a firmer euro could prompt addition easing. Reports of increasing violence in the Ukraine have been a further euro negative. We have been advocating 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. Major EUR-USD resistance is marked at 1.3900 and 1.3966.

    [USD, JPY]
    USD-JPY lifted to the 102.00 area, but the market is lacking direction after the sharp turn lower last week from levels above 104.00. The price action 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]
    Sterling softened slightly, with Cable dipping to 1.6711 from the 1.6725 region and EUR-GBP ticking fractionally higher, following an unexpected drop in U.K. BRC retail sales of -1.7% y/y in the like-for-like headline (+1.0% had been the consensus). U.K. inflation data today is also expected to show another cycle low in headline CPI, to 1.6% y/y, though the monthly batch of labour market data (due Wednesday) should continue to paint a picture of robust economic recovery, in line with the PMI surveys and other evidence. Overall, we expect sterling to remain broadly underpinned. The high in Cable last 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. Support is marked at 1.6695-6700 and 1.6660.

    [USD, CHF]
    EUR-CHF dipped to a one-month low of 1.2142 on Monday, even though SNB's Jordan said that Swiss inflation remains "very low," and that the franc cap would still be defended. The situation in the Ukraine remain a concern, and this is a supportive factor for the CHF. More generally, over the last week Lower stock markets and weak China trade data have lifted the Swiss currency's safe haven premium. The 1.2200 has reverted to being a resistance level, while the cycle low of 1.2104 is a key support. Below 1.2100 the risk of SNB intervention would ratchet up.

    [USD, CAD]
    USD-CAD is back above 1.0900 after logging an three-month low of 1.0858 last Wednesday. Price action has been bearish over the last week, but the failure to make weekly close under 1.0900-10 may disappoint some. We also 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