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By XE Market Analysis April 28, 2014 3:14 am
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    XE Market Analysis: Europe - Apr 28, 2014

    Not much movement today among the main currencies in pre-Europe trade in Asia. EUR-USD oscillated in the mid-to-low 1.38s and USD-JPY in the low 102s. Japan retail sales for March came in at +11.0% y/y, slightly above expectations as consumers front-loaded purchases ahead of the early April imposition of the three percentage point rise in sales tax. The Nikkei shed 1.8% and hit a two-week low amid a bearish session among Asian bourses, affected by the deteriorating situation in Ukraine and prospects of new sanctions on Russia. Honda also missed profit forecasts. AUD-USD made time in the upper 0.92s, unaffected by a 5% dive in iron ore futures (hit by a financing crack down in China and high inventory levels).

    [EUR, USD]
    Despite the recent perkiness, we continue to favour the downside in EUR-USD as the ECB is desirous of a weaker euro and with disinflation likely to persist in the Eurozone. 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 has lost upside steam in the wake of the BoE minutes release of last Wednesday, which didn't mark much of a departure from the already established dovish policy stance -- a disappointment to some market participants who had been anticipating more of a decisively hawkish tone. Cable settled in the high 1.67s, down from the week's peak at 1.6839. We continue to target 1.7000 as we see the U.K. economic recovery holding strong into Q3. Support is marked at and 1.6762 and 1.6750.

    [USD, CHF]
    EUR-CHF has settled around 1.2200 again, having recovered from the one-month low of 1.2142 that was earlier in the month. The cycle low of 1.2104 and 1.2100 are considered key support levels. While situation in the Ukraine remains a concern, and 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 repeated last Friday that the central bank remains committed to defending the currency cap.

    [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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