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By XE Market Analysis June 4, 2014 3:23 am
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    XE Market Analysis: Europe - Jun 04, 2014

    The USD is firmer against most currencies (the AUD being an exception), albeit moderately so with the market hunkering down ahead of Thursday's ECB announcement and Friday's U.S. payrolls showstoppers. USD-JPY popped to a one-month high at 102.79, just over 40 pips up on yesterday's London closing level, before settling around 102.65. Asia stocks were lower today, which was generally ascribed in market commentaries to being pre-event profiting taking after the MSCI regional index clocked seven-month highs, and this backdrop helped curtail yen selling. The Aussie was an outperformer today following above-expectations GDP data, which came in at 1.1% q/q and 3.5% y/y, above the respective median forecasts for 1.0% and 3.3%. The May AIG services also rose to 49.9 from 48.6. AUD-USD spiked over 40 pips in making a two-day peak of 0.9302, though subsequently dipped back to the 0.9270 area. EUR-USD ground lower, testing below 1.3610.

    [EUR, USD]
    EUR-USD ground lower, testing below 1.3610, after yesterday's rebound stalled shy of 1.3650, which was last Thursday's high and considered by some to be a key resistance marker. The market is now very much hunkering down ahead of Friday's ECB announcement and Friday's U.S. payrolls showstoppers, so we don't expect price action fireworks in the interim. We are anticipating EUR-USD to fall to sub-1.3500 levels over the coming week as the pressure is on for the ECB to deliver sufficient easing measures to head of deflation risks while the U.S. May payrolls report, we expect, will be dollar supportive.

    [USD, JPY]
    USD-JPY popped to a one-month high at 102.79, just over 40 pips up on yesterday's London closing level, before settling around 102.65. Asia stocks were lower today, which was generally ascribed in market commentaries to being pre-event profiting taking after the MSCI regional index clocked seven-month highs, and this backdrop helped curtail yen selling. Bigger picture, USD-JPY remains entrenched 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 yet, 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 is weaker against the generally strong dollar, and risks to remain to the downside as this Friday's U.S. jobs report should be dollar supportive, though the pound should fare better against the euro given the contrasting paths of the BoE and ECB. Cable support is 1.6700 and 1.6693, and a break here would swing the Apr-15 low at 1.6659 into scope. EUR-GBP, meanwhile, looks like a good sell following recent gains, with 0.8150-52 marking key resistance. Today's services PMI should complete the picture of a continuing brisk pace of economic recovery in the U.K.. The BoE's MPC convenes for the June meeting today, announcing Thursday, and while this should be a non-event for markets, as no change and no statement are widely expected, there is a chance that one MPC member (focus on Weale) starts to vote in favour of hiking rates. We'll have to wait until the minutes on Jun-18 to find out.

    [USD, CHF]
    EUR-CHF has settled in the low 1.22s. The cross recently recovered from a recent foray to the mid-121s. The cycle low of 1.2104 and 1.2100 are key support levels. The threat of SNB intervention into its 1.2000 limit peg is helping to deter franc buying to some extent. SNB's Jordan repeated recently that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD has been in a correction/consolidation phase since late January following a four-month rally period from sub-0.9700 levels. A moderate bear trend had started to emerge, but the still-dovish outlook for BoC policy seemed to be put a limit on the CAD's upside. We expect a choppy, sideways bias in USD-CAD.

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