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By XE Market Analysis June 30, 2014 3:21 am
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    XE Market Analysis: Europe - Jun 30, 2014

    The USD majors were steady during pre-Europe Asian trade. Month- and quarter-end considerations made for quiet trade. EUR-USD consolidated gains seen on Friday, holding around 1.3640-45. Other Europe-dollar pairings posted a similar uneventful price action. EUR-CHF held in the 1.2150s after logging a fresh trend low at 1.2150 on Friday amid concern about the situations in Iraq and Ukraine, which has been underpinning the Swiss currency's safe-haven premium. USD-JPY traded lower, despite firmer Japanese and Asian stocks and sub-forecast Japanese industrial production, which came in at +0.5% m/m in the preliminary estimate, disappointing the median for +0.9%. The pair edged out a seven-week low of 101.23. USD-JPY had closed on Friday below the 200-day moving average for the first time in the 'Abenomics' era, which, along with yield differentials, maintained a bearish tone. Sterling was unmoved the latest BoE-speak. Carney said that the value of the pound should settle over time, while his colleague Bean said that market expectations of a rise in interest rates at the turn of the year are "reasonable."

    [EUR, USD]
    EUR-USD recovered to the 1.3645-50. We still retain a bearish EUR-USD view as there is sufficient contrast between the Fed and ECB policy stances. We mark key EUR-USD resistance at 1.3650-51 and 1.3672-77, the latter levels of which encompass the 200-day moving average and the Jun-6 peak.

    [USD, JPY]
    USD-JPY traded lower, despite firmer Japanese and Asian stocks and sub-forecast Japanese industrial production, which came in at +0.5% m/m in the preliminary estimate, disappointing the median for +0.9%. The pair edged out a seven-week low of 101.23. USD-JPY had closed on Friday below the 200-day moving average for the first time in the 'Abenomics' era, which, along with yield differentials, maintained a bearish tone. 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]
    We remain sterling bullish with the BoE having left the hawkish starting gates ahead of the Fed and ECB. BoE's Bean said over the weekend that market expectations of a rise in interest rates at the turn of the year are "reasonable." Last week's major-trend peak at 1.7063 provides an initial target in Cable, while a big-picture Fibonacci retracement level at 1.7330, which is a 50% retracement level of the 2007 to 2009 decline, offers a longer-term target. Our EUR-GBP target is provided by the major trend lows of July 2012 at 0.7755.

    [USD, CHF]
    EUR-CHF settled in the 1.2150s after logging a fresh trend low at 1.2150 on Friday amid concern about the situations in Iraq and Ukraine, which has been underpinning the Swiss currency's safe-haven premium. Technically, the break of a former uptrend channel support line at 1.2190 opened the way to the mid-1.21s. The cycle low of 1.2104 and 1.2100 are key support levels, but so far have remain unchallenged. We would expect that the threat of SNB intervention into its 1.2000 peg to deter franc buying below 1.2100. SNB's Jordan repeated recently that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD steadier after logging fresh six-month low under 1.0662 on Friday. The pair breached below the 200-day moving average at 1.0783 early last week and has been trending lower since. The move reflects a broad dollar-bloc bid that was sparked by much stronger than expected PMI data out of China and Japan, which has underpinned the commodity-correlating currencies as investors adjust a more optimistic world outlook. The BoC is also under pressure to reconsider its dovish policy stance. Resistance is pegged at 1.6996 (Friday's high) and 1.0700.

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