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By XE Market Analysis April 23, 2014 2:38 am
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    XE Market Analysis: Europe - Apr 23, 2014

    A dive in the AUD has been the main event following sub-expectations inflation data out of Australia. The other main data release was the flash estimate of the HSBC-Markit China PMI, which came in as expected at 48.3, though its sub-50.0 reading was still used as an excuse to trigger a second wave of AUD selling and trimming of longs across Asia-Pacific equity markets, which largely gave back intraday gains as a consequence. The PBoC announced a cut in reserve requirements for some rural banks, but this didn't have impact on the global markets stage, and not did justifications by BoJ's Kuroda and Nakaso for the ongoing QE program. AUD-USD dove from 0.9375 to a low of 0.927, the lowest level since Apr-7. AUD crosses plunged in similar fashion, including AUD-NZD. Australia Q1 CPI came in at 0.6% q/q, down from +0.8% last. The median forecast was for an unchanged 0.8% reading. RBA member Edwards also said that he would prefer a weaker Australian dollar. Elsewhere, USD-JPY has been seeing a quiet session, dipping to the 102.50 but near net unchanged from London closing prices. EUR-USD was firming into the European open, pushing 1.3830.

    [EUR, USD]
    EUR-USD continues to hold above 1.3800. We continue to favour the downside in EUR-USD, partly as the ECB is desirous of a weaker euro. Technically, the rally from last's July 1.2042 low to the early March peak of 1.3966 is waning, as indicated by momentum indicators (particularly apparent on the weekly chart, where there is a strong divergence between underlying momentum and price trend). Resistance is marked at 1.3850-55, support at 1.3785 and 1.3765.

    [USD, JPY]
    USD-JPY has continued to oscillate in the 102s. The pair is lacking direction amid a 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 remains broadly underpinned amid expectations for this Wednesday's release of the BoE MPC minutes to the recent policy meeting will take a relatively hawkish turn. Last week's stellar labour market report for February and March is also continuing to resonate. Cable has lifted from sub-1.6790 levels back toward last Thursday's five-year high of 1.6842. We target an eventual break above 1.7000. Support is now marked at 1..6800 and 1.6780.

    [USD, CHF]
    EUR-CHF has settled around 1.2200 again, having recovered from the one-month low of 1.2142 that was seen last on Monday. The cycle low of 1.2104 was left untested. While situation in the Ukraine remains a concern, and this is a potential supportive factor for the CHF, the threat of SNB intervention into its 1.2000 limit peg is helping to deter franc buying. SNB's Jordan said earlier in the month that Swiss inflation remains "very low," and that the franc cap would still be defended.

    [USD, CAD]
    USD-CAD has settled just above 1.1000 after recovering from the three-month low of 1.0858 that was seen on Apr-9. The failure to make weekly close under 1.0900-10 was disappointing to CAD bulls, to whom we would advise caution as the Fed vs BoC stance should remain broadly supportive of USD-CAD. Resistance is pegged at 1.1059-60 (50-day moving average) and 1.1100 (former pivot level). Support is marked at 1.0985 (20-day moving average) and 1.0942 (Apr-14 low).

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