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By XE Market Analysis April 29, 2014 2:45 am
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    XE Market Analysis: Europe - Apr 29, 2014

    AUD weakness was seen in quiet trade, with Japanese markets closed for the Showa Day holiday. China's efforts to crack down on financing in the iron ore import market is continuing to have a detrimental impact on the prices of the commodity, which forms a big chunk of Australia's export. Iron ore prices made a seven-week low, and is set to log a fifth consecutive monthly loss. The Aussie has already been trading softer in the wake of last week's sub-expectations inflation data, and AUD-USD dropped through last Thursday's 0.9252 low and clocked a new three-week low of 0.9227, subsequently settling around 0.9240. The NZD also made fresh lows against the USD. USD-JPY flat-lined around 102.50-55. EUR-USD saw a modest upside drift, rising to the 1.3660-70 area after closing in London yesterday at 1.3640 bid, but remained well within yesterday's range.

    [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 1.3884-1.3900, key supports at 1.3785 and 1.3765.

    [USD, JPY]
    Japanese markets closed for the Showa Day holiday and USD-JPY flat-lined around 102.50-55. The pair 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 found a fresh bid on Monday by news that with Pfizer of the U.S. said to be nearing a deal to buy the U.K.'s AstraZeneca, which would be the biggest takeover of a British firm on record if it went through (around GBP 51.5 bln, reportedly). The U.K. Hometrack April house price figure also came in above expectations at +0.6% m/m and 6.0% y/y. We continue to target Cable to 1.7000 as we see the U.K. economic recovery holding strong into Q3. The first estimate of U.K. Q1 GDP is up today, which we expect at +0.9% q/q for 3.2% y/y (medians same), up from respective 0.7% and 2.7% outcomes in Q4 data..

    [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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