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By XE Market Analysis April 21, 2017 3:24 am
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    XE Market Analysis: Europe - Apr 21, 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 is holding in the lower 1.07s, consolidating after failing to sustain yesterday's run to a three-week high at 1.0777. Sunday's French presidential election presents polarized risks for the euro, and now follows a new terrorist attack in Paris, which left two police dead. Two anti-EU candidates, Le Pen and Melenchon, have been polling over a combined 40%, though the pro-EU Macron has been leading the polls. EUR-USD support is at 1.0700.

    [USD, JPY]
    USD-JPY has settled around 109.00. The yen was briefly bid following news of the terrorist attack in Paris, which left two police dead, though impact proved limited. The yen subsequently dipped after BoJ's Governor Kuroda made dovish remarks during an interview with Bloomberg TV, where he said, "we will stick with yield curve control" and that "we think the current pace of purchases and monetary base increase will continue for some time." Not really anything new here, but the reaffirmation that the BoJ is sticking to its dovish course, which contrasts with the Fed and even the ECB, was enough to prompt a wave of yen selling. USD-JPY logged an intraday high at 107.42 before impetus faltered, leaving yesterday's nine-day peal at 109.49 untested. USD-JPY resistance is at 109.49-50, support is at 108.50-53.

    [GBP, USD]
    Sterling has remained in consolidation mode following the bout of across-the-board gains that it saw on Tuesday, after British PM May called a snap election, which will take place on June 8 and is widely expected to see her Tory Party greatly increase its majority. The thinking is that this will have the effect of diluting the influence of hardline Brexiters, and give May greater flexibility in negotiation with the EU. She won't have to call an election until three years after actual Brexit in 2019, furthermore, which pundits reckon would increase the odds for her government setting up a transitional phase until new trading terms have been agreed with the EU (as negotiations for these are likely to be longer than two years). Cable has been orbiting 1.2800, still about 2% up on the week, though off Tuesdays six-month peak at 1.2908.

    [USD, CHF]
    EUR-CHF has been trading on both sides of 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 clocked a six-week peak at 1.3490, extending the recovery from last week's six-week low at 1.3223 and making yesterday the fourth consecutive up session. The mid-week nosedive in oil prices had been weighing on the Canadian dollar, though the currency has today perked up a little into Canadian CPI and retail sales data. USD-CAD support is at 1.3440, while the early March high at 1.3534, which is a near four-month peak, marks an upside waypoint.

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