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By XE Market Analysis April 22, 2015 2:46 am
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    XE Market Analysis: Europe - Apr 22, 2015

    EUR-USD has settled in the mid-1.07s after recovering from the six-day low at 1.0659 that was seen yesterday. The 20-day moving average at 1.0772 marks resistance ahead of 1.0848 (Apr-17 high). Support comes in at 1.0717-20, which proved pivotal yesterday. Overall directional bias is quite flat, reflected by a levelling out in the 20-day moving average over the last few weeks, with the pair having oscillated between 1.0462 and 1.1052 since mid-March. USD-JPY has consolidated in the mid-to-upper 119s, remaining below yesterday's one-week high at 119.79. The convergence of the 20-, 50 and 200-day moving averages, presently sitting at 119.64, 119.80 and 119.30, respectively, indicates the broad lack of direction of USD-JPY, which has been entrenched in a sideways trading pattern since early December. AUD-USD rallied to a two-day high of 0.7778 on Australian CPI data, which in Q1 rose 0.2% q/q and 1.3% y/y, both in line with median forecasts, though the trimmed mean CPI rose to 2.3% y/y, above the 2.2% y/y rate expected.

    [EUR, USD]
    EUR-USD has settled in the mid-1.07s after recovering from the six-day low at 1.0659 that was seen yesterday. The 20-day moving average at 1.0772 marks resistance ahead of 1.0848 (Apr-17 high). Support comes in at 1.0717-20, which proved pivotal yesterday. Overall directional bias is quite flat, reflected by a levelling out in the 20-day moving average over the last few weeks, with the pair having oscillated between 1.0462 and 1.1052 since mid-March. Signs of economic improvement in the Eurozone and a weakening of expectations about the timing of Fed tightening have given EUR-USD a cushion, reflected by the steadying in yield differentials between the 10-year T.note and Bund benchmarks around 175-180 bp. The big issue remains Greece. It's now clear that there won't be a deal at Friday's Eurogroup meeting, putting the focus to end-of-June deadline. The odds for a Grexit scenario have been shortening significantly recently given Athens' intransigence to adopt creditor-satisfactory reforms. ECB's Coeure said in a newspaper interview today that "tangible progress in the quality of the discussions" between Greece and its creditors in recent days, but added that "significant differences on substance remain and substantial further work is needed."

    [USD, JPY]
    USD-JPY has consolidated in the mid-to-upper 119s, remaining below yesterday's one-week high at 119.79. The convergence of the 20-, 50 and 200-day moving averages, presently sitting at 119.64, 119.80 and 119.30, respectively, indicates the broad lack of direction of USD-JPY, which has been entrenched in a sideways trading pattern since early December. There has been nascent speculation that the BoJ may taper its QQE program in 2016, though this is a minority view with just four out of 32 respondents to a Bloomberg survey expecting this, while there is a majority who still expect an expansion in stimulus by the end of October.

    [GBP, USD]
    Cable has settled above 1.4900 after recovering from yesterday's six-day low at 1.4856. The pair has traded largely in step with EUR-USD, though EUR-GBP had seen some downside drift amid general euro underperformance yesterday. Cable capped out at one-month peak of 1.5053 on Friday, which stalled just shy of the 200-day moving average. Initial support is now marked at 1.4825. Incoming UK data has and should continue to show that growth momentum is building in the economy. The EY Item Club said that the UK recovery has now reached "escape velocity," and that cheap oil and stronger pay growth is setting up the biggest rise in disposable incomes for two decades, which the group estimates will by +3.7% in 2015 (based on CPI averaging 0.1%). We concur with this view. The EY Item Club also expects GDP growth of 2.8% this year, which would match last year's, and 3.0% in 2016. The group also notes that consumer behaviour has not been affected by uncertainties about the outcome of the upcoming election. The general election is on May-7, which we expect will curtail the pound's upside potential.

    [USD, CHF]
    EUR-CHF has steadied after clocking a new 10-week at 1.0234 on Monday, since settling to the 1.0260-70 area. While euro underperformance remains the SNB will probably be best advised to sit on its hands, although the central bank said at its March policy review that the franc is "significantly overvalued," and would "remain active in the foreign exchange market, as necessary." Sight deposit data, however, suggest that the SNB hasn't intervened since January, and previous speculation of the central bank having a "soft floor" at 1.0500 has long since been discredited.

    [USD, CAD]
    USD-CAD has this week recovered above its 200-day moving average at 1.2236 after making a three-month low at 1.2088 on Friday. Last week's sharp decline (the pair had opened near 1.2570) followed a run of weaker U.S. data and the BoC's downplaying of the oil price shock on the Canadian economy, which was backed up by a decent rally in oil prices. USD-CAD's down move is technically significant as it smashed the series of range lows established over the last four months in the 1.2351 to 1.2400 region. These levels now revert as strong resistance markers, while the overall bias is likely to remain lower. A big-picture support region is at 1.1950-1.2000.

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      rond Posts: 2

      Changes in world trade patterns. Further research should be done

      Otherwise failure is the end of the road

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