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By XE Market Analysis May 8, 2014 2:55 am
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    XE Market Analysis: Europe - May 08, 2014

    The AUD rallied following stronger than expected Australian employment data, which rose 14.2k in April, and above-forecast trade numbers out of China, which helped feed a risk positive session in Asia Pacific markets. AUD-USD rose above 0.9390 for the first time since Apr-15. Elsewhere, USD-JPY oscillated in the high 101s, ebbing to a 101.70 low after making a 101.95 peak. EUR-USD dipped to a low of 1.3905, which is a former daily high and a key near-term support level, before recovering to the 1.3915-20 area. The euro market is hunkered down ahead of today's ECB meeting and press conference. EUR-CHF consolidated the gains posted yesterday to the high 1.21s, which reflected a correction in the Swiss franc's safe haven premium following Putin's mollifying words of diplomacy with regard to Ukraine.

    [EUR, USD]
    EUR-USD dipped to a low of 1.3905, which is a former daily high and a key near-term support level, before recovering to the 1.3915-20 area. We remain committed to a bearish EUR-USD view despite recent gains. The market has already discounted a no-change decision from the ECB today. Recent ECB comments has seen any expectations for a 'big bazooka' policy easing fade, which is an explanation for the recent bid tone in EUR-USD despite some position surprises in U.S. data of data, particularly the April payrolls report. Technically, a decline and daily close back under 1.3900 would be bearish after failing to reach the 1.3966 major-trend peak. Support is marked by previous daily highs in the 1.3900-1.3905 zone.
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    [USD, JPY]
    USD-JPY has oscillated in the high 101s, ebbing to a 101.70 low after making a 101.95 peak. A pick-up in risk appetite in Asia following good China trade data helped curtail the yen's recent bid, although with the BoJ minutes to the early April meeting having signalled that the central bank doesn't see that an expansion in its already aggressive policy would be necessary, the yen may find a generally firmer footing. 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, 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 should remain underpinned into next Wednesday's BoE Inflation Report, which should bring upward revision to inflation and growth projections and generally present a less dovish, more hawkish tone following a run of strong data out of the U.K.. EUR-GBP logged a two-month low on Wednesday, at 0.8208, while Cable has consolidated in the upper 1.69s, looking set made a break above 1.7000. The 1.7000 is a big psychological level and is reported a big option barrier level. Today's BoE announcement should prove to be a non-event for markets as no change and no statement are widely expected.

    [USD, CHF]
    EUR-CHF has consolidated the gains posted yesterday to the high 1.21s, which reflected a correction in the Swiss franc's safe haven premium following Putin's mollifying words of diplomacy with regard to Ukraine. 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 extended lower, below 1.0900 after giving up the chase above 1.1000 last week. The Arp-9 three-month low of 1.0858 now swings back into view. Bigger picture, USD-CAD has been in a consolidation phase since late January following a four-month rally period from sub-0.9700 levels. The bias has tilted to the downside, toward 1.0700.

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