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By XE Market Analysis April 16, 2014 3:01 am
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    XE Market Analysis: Europe - Apr 16, 2014

    USD-JPY nudged above 102.00 to an eight-day high of 102.25 on the back of general yen weakness as the currency, once again, correlated inversely with stock market direction. EUR-JPY lifted to a five-day peak of 141.32. The MSCI Asia Pacific equity index was up 0.7% in PM trade in Tokyo while the Nikkei surged over 2.5%, benefitting from the tech-led rebound on Wall Street on Tuesday. China Q1 GDP also came in above expectations at 7.4% y/y. Japanese February industrial output met expectations and the preliminary estimate, at -2.3% y/y. BoJ Governor Kuroda said that monetary easing is having the intended effect, while Finance Minister Aso said that the drop in consumer demand following the sales tax hike two weeks ago is less than expected. NZD-USD dropped to a near two-week low following New Zealand CPI data, which came in at +0.3% q/q in Q1, below expectations for +0.5%. AUD-USD dipped to an eight-day low of 0.9332 before recovering to the 0.9380 area on the China data. EUR-USD firmed slightly, to the 1.3830 area.

    [EUR, USD]
    EUR-USD has steadied in the low 1.38s after making a six-day low of 1.3790 on Tuesday. With the ECB desiring a weaker euro, and the worrisome situation in the Ukraine, we continue to favour the downside in EUR-USD. We mark resistance at 1.3833 and 1.3850, support at 1.3790 and 1.3765.

    [USD, JPY]
    USD-JPY 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]
    Cable recovered above 1.6700 after dipping to 1.6659 on Tuesday. Yesterday's March CPI data came at a new cycle low of 1.6% y/y, below the BoE's 2.0% target, but the market is now focused on expectations for a solid labour market report today, which should see unemployment dip back to 7.1% and confirm the first positive rate in real average household incomes since2009. 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 1.7000 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 remains 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 has been testing 1.1000 after recovering from the three-month low of 1.0858 that was seen last Wednesday. Price action was bearish over the last week, but the failure to make weekly close under 1.0900-10 was disappointing in this respect. We also would advise CAD bulls to exercise some caution, as the Fed vs BoC stance should remain broadly supportive of USD-CAD.

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