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By XE Market Analysis July 30, 2013 3:07 am
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    XE Market Analysis: Europe - Jul 30, 2013

    The USD held firm in Asia, following the tone established yesterday during the European and North American sessions as the market adjusted in the face of important upcoming risk events, which include policy meetings of the Fed, ECB and BoE, and the U.S. payrolls report on Friday. A rebound in Asian stocks, which by the measure of the MSCI Asia Pacific index, had made about a one third recovery of yesterday's losses, came despite mixed economic data leads and didn't seem to impact FX much. The AUD was the biggest directional mover out of the main currencies, declining to a two-week low of 0.9061 against the USD following weak Australia building approvals, which fell by a disappointing 6.9% (m/m) in June, and after weak production data out of Japan and South Korea, and after a dovish dose of speak from RBA Governor Stevens. EUR-USD was modestly lower from late NY closing levels at 1.3255 bid, while USD-JPY was up a net 0.4% at 98.2, rebounding from yesterday's one-month low. Japanese data today were mixed.

    [EUR, USD]
    EUR-USD's rebound faded out as the market failed to take out last week's high of 1.3297 and the key 1.3300 mark, and consolidation looks likely to persist into the conclusion of the Fed's policy announcement on Wednesday. Other risk events loom, with the ECB and BoE meeting on policy on Thursday and Friday bringing the July U.S. payrolls report. Initial support comes in at 1.3239 (yesterday's low) and 1.3200. The 20-day moving average is at 1.3180.

    [USD, JPY]
    The USD held firm in Asia, following the tone established yesterday during the European and North American sessions on Monday as the market adjusted in the face of important upcoming risk events, which include policy meetings of the Fed, ECB and BoE, and the U.S. payrolls report on Friday. A rebound in Asian stocks, which by the measure of the MSCI Asia Pacific index, had made about a one third recovery of yesterday's losses, came despite mixed economic data leads and didn't seem to impact FX much. USD-JPY was up a net 0.4% at 98.2, rebounding from yesterday's one-month low. Resistance is given by the present position of the 50-day moving average, at 98.57. The JPY has been trending firmer since early July, though we expect "Abenomics" policies to limit upside potential. Japanese data today were mixed. The unemployment rate dropped more than expected in June, coming in at 3.9% from 4.1%, though household spending for the same month was a disappointing -0.4% and industrial production dropped 3.3%, far worse than the consensus expectation for 1.5% .

    [GBP, USD]
    Cable dipped from the 1.5400 level amid market repositioning into key risk events. The break of the 1.5355-65 support zone, which encompassed previous lows and a trend support line, was a technically bearish development. Support is pegged at 1.5305, the present situation of the 50-day moving average, and 1.5300 itself. The BoE's Monetary Policy Meeting highlights a fairly busy week in the U.K. We expect the BoE will leave the repo rate and QE total unchanged but to announce a formal adoption of forward policy guidance. In the event this may cause some sterling weakness, but such a move wouldn't constitute a sea-change for markets having been well anticipated already.

    [USD, CHF]
    USD-CHF remains in a bear trend, overall, but there is potential for a test of 0.9370, which marks the positive of the two-week trend resistance line. The Swiss calendar this week is highlighted by the KOF economic barometer, expected to improve to 1.21 (median same) after 1.16 in the previous month. This would signal improving economic momentum over the next six months. The SVME PMI survey for July is expected to show similar improvement, to 52.5 from 51.9. Although the fundamental outlook is improving we don't expect any softening in the SNB's commitment to maintain zero interest rates and its 1.20 limit cap in EUR-CHF.

    [USD, CAD]
    USD-CAD perked up amid the generally firmer tone of the USD into the Fed's announcement on Wednesday and, beyond that, the U.S. payrolls report on Friday. Canada also releases GDP data on Wednesday, and trade in the meantime is likely to be non-committal. The 1.0250 level remains key, with bids parked at the level, and sell-stops below. On the other side, offers are likely around 1.0300.

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