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By XE Market Analysis March 30, 2017 2:42 am
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    XE Market Analysis: Europe - Mar 30, 2017

    The dollar has continued to hold up, trading at or near one-week-plus highs versus the other major currencies. USD-JPY earlier clocked a six-day high at 111.42, since ebbing back toward 111.00. EUR-USD has remained heavy, coming within a pip of yesterday's 10-day low at 1.0740, which was seen after a Reuters report suggested that the ECB is not ready to change its dovish guidance, with recent speculation of otherwise having been based on a misinterpretation. AUD-USD traded at an eight-day high at 0.7676. Sterling has consolidated the recovery-from-weakness price action of yesterday following the UK's invocation of Article 50. More chop is likely for sterling markets as the long divorcing process commences. We still at the setting-up-the-stalls stage, and the EU side will not likely be ready to start negotiating in earnest until after the German election in September. Brexit minister Davies will today set out the "Grand Repeal" bill, which will import EU laws and regulations into UK law.

    [EUR, USD]
    EUR-USD has remained heavy, coming within a pip of yesterday's 10-day low at 1.0740, which was seen after a Reuters report suggested that the ECB is not ready to change its dovish guidance, with recent speculation of otherwise having been based on a misinterpretation. EUR-JPY logged a one-month low at 119.01 yesterday, since recouping to a peak of 119.84 before settling around 119.50. We take a bearish view of EUR-USD. Tax cut legislation and plans for deregulation should easier hurdles for the Trump administration to deliver on than health care reform, and this should help maintain the hawkish path of the Fed. EUR-USD breached below trend support at 1.0792-94. Support is at 1.0724-25, ahead of the March-20 low at 1.0719.

    [USD, JPY]
    The yen has lifted from its lows seen during the Tokyo session. USD-JPY earlier clocked a six-day high at 111.42, since ebbing back toward 111.00 and near net unchanged levels on the day as stock markets in Japan and other Asian centres turned lower. EUR-JPY selling has been in the mix over the last day following a Reuters report suggesting that the ECB is not ready to change its dovish guidance, and that recent speculation of otherwise has been a based on a misinterpretation. The cross logged a one-month low at 119.01 yesterday, since recouping to a peak of 119.84 before settling around 119.50. Near-term USD-JPY resistance is at 111.48-50, which encompasses the March-24 high. We expect the yen to remain in a range for now after seeing its biggest rallies since 2011 over the last couple of weeks, which had been driven by safe haven demand as the "Trumplation" trade unravelled and global stocks corrected.

    [GBP, USD]
    Sterling has consolidated the recovery-from-weakness price action of yesterday following the UK's invocation of Article 50. More chop is likely for sterling markets as the long divorcing process commences. We still at the setting-up-the-stalls stage, and the EU side will not likely be ready to start negotiating in earnest until after the German election in September. Brexit minister Davies will today set out the "Grand Repeal" bill, which will import EU laws and regulations into UK law. The Scottish parliament voted earlier in the week to demand another independence referendum, and there were a flurry of warnings yesterday from German, Japanese and other foreign business that have vested interest in the UK, although some businesses, including Deutsche Bank and Siemens, reaffirmed commitments to their UK operations. We see the balance of risks as being lower for sterling against the dollar, which has the advantage of a monetary policy tightening while the BoE is likely to remain on hold for the foreseeable. Cable support is at 1.2336-40, resistance at 1.2471-72.

    [USD, CHF]
    EUR-CHF has settled to an oscillation around 1.0700 after chopping amid euro volatility in recent sessions. The SNB left policy unchanged at its quarterly policy review last week, as expected, and repeated its boilerplate complaint that the franc remains "significantly overvalued," which was also to have been expected. EUR-CHF resistance is 1.0788-90, support at 1.0684-90.

    [USD, CAD]
    USD-CAD is softer today after edging out a two-week high at 1.3414 on Tuesday. We have been recommending buying into weakness given the recent break lower in oil prices and with the Fed only at the beginning of what is looking likely to be a protracted tightening cycle. We target December highs near 1.3600. Interim resistance is at 1.3420-25. Support is at 1.3376-80.

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