Home > XE Currency Blog > XE Market Analysis: Europe - Apr 20, 2017

AD

XE Currency Blog

Topics4861 Posts4906
By XE Market Analysis April 20, 2017 3:22 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 3290
    XE Market Analysis: Europe - Apr 20, 2017

    The dollar majors have been plying narrow ranges with the risk-off trade taking a breather but positional commitment remaining low into France's election on Sunday. EUR-USD has settled in a narrow range just below yesterday's three-week high at 1.0737, and USD-JPY has settled in the upper 108s. Gains above 109.00 in the case of the latter proved fleeting, with geopolitical risks and less acute Fed tightening expectations maintaining some safe haven demand for the yen on the one hand and a sell-on-gains play on the dollar on the other hand. Japan released better than expected trade today, though to little forex market impact. Both export and import growth rose in March figures, with imports hitting its highest growth in three years on the back of the stronger yen (which is presently up over 7% versus the dollar on the year-to-date). Sterling is showing moderate gains, though has remained above the highs seen after May on Tuesday called a snap election for June. Cable has lifted back above 1.2800 after logging a correction low at 1.2769 yesterday.

    [EUR, USD]
    EUR-USD has settled in a narrow range just below yesterday's three-week high at 1.0737. The pair is up from a one-month low seen last week at 1.0569 after Trump said the dollar was "too strong." The French presidential election on Sunday will dominate euro markets from here on in, with two anti-EU candidates, Le Pen and Melenchon, polling over a combined 40%. We expect the euro to be capped in the meantime, though directional risks are polarized.

    [USD, JPY]
    USD-JPY has settled in the upper 108s. Gains above 109.00 proved to be fleeting, with geopolitical risks and less acute Fed tightening expectations maintaining some safe haven demand for the yen on the one hand and a sell-on-gains play on the dollar on the other hand. Japan released better than expected trade today, though to little market impact, with both export and import growth rising in March figures, with the imports growth rate hitting its highest in three years on the back of the stronger yen (which is presently up over 7% versus the dollar on the year-to-date). USD-JPY resistance is at 109.05-10 and 109.22-25. Support is at 108.50-53.

    [GBP, USD]
    The pound is consolidating gains seen yesterday, following the PM's call for a snap election on Tuesday, The thinking in markets is that the Tory Party would likely win a much a bigger majority than present, if polls are to be believed, which would give the Prime Minister much more flexibility in upcoming negotiations with the EU. May will also have three years clear after actual Brexit in 2019 before having to hold a general election, which pundits reckon will also give her much greater leeway in forming a possible transitional trade agreement with the EU. Most analysts are expecting the pound to trade steadier-to-firmer now, which we concur with while advising caution in these febrile times. One risk would be a strong vote for the Scottish National Party on June 8, which would increase the odds for a new independence vote (polls presently suggest there is limited appetite for this, however). Cable has lifted back above 1.2800 after logging a correction low at 1.2769 yesterday, but remains off Tuesday's six-month high at 1.2908.

    [USD, CHF]
    EUR-CHF has drifted back under 1.0700 in recent sessions. The February-8 low at 1.0632 provides a downside reference point, which is lowest level traded since last June. Recent declines have reflected broader euro weakness following the ECB's walk back of market speculation that the central bank might have been preparing to switch out of its dovish guidance at its policy meeting next month. There is also political risk into France's presidential elections. EUR-CHF support is at 1.0677, and resistance is at 1.0720-25.

    [USD, CAD]
    USD-CAD rose to a five-week high at 1.3490, extending the recovery from last week's six-week low at 1.3223. Softer oil prices have been weighing on the Canadian dollar. Support is at 1.3440.

    Paste link in email or IM