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By XE Market Analysis May 9, 2014 3:26 am
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    XE Market Analysis: Europe - May 09, 2014

    The USD is modestly firmer against most currencies after advancing during the New York PM session and then holding largely steady in pre-Europe Asia trade. USD-JPY firmed to the 101.70-75 area after closing in London around the 101.60, recovering from a dip to sub-101.50 levels in the interim. EUR-USD was whittled lower and clocked a new 'post-ECB' low of 1.3832, which is an eight-day nadir, with the May-1 low of 1.3812 back in scope. Cable coattailed EUR-USD, dipping to a low of 1.6915 before rebounding to the 1.6930 area. As seen in EUR-USD on the pair's short-lived approach to 1.4000 yesterday, there had been a big show of selling interest in Cable into 1.7000, and this seems to have taken the wind out of sterling's sails for now. AUD-USD receded to a low of just under 0.9350, over 35 pips down on Thursday's London closing level.

    [EUR, USD]
    EUR-USD whittled lower and clocked a new 'post-ECB' low of 1.3832, which is an eight-day nadir, with the May-1 low of 1.3812 back in scope. The dovish remarks by Draghi yesterday, along with an encouraging jobless claims figure out of U.S., has set up a dovish tone, which we think should set in. It had been somewhat perplexing that the USD didn't manage to make better headway versus the EUR following the stellar April U.S. payrolls report. Supports come in at 1.3825 (50-day moving average), 1.3812 (the aforementioned May-1 low) and 1.3800. We would take a weekly close under 1.3850 as a bearish development.

    [USD, JPY]
    USD-JPY firmed to the 101.70-75 area after closing in London around the 101.60, recovering from a dip to sub-101.50 levels in the interim. The pair 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]
    Cable coattailed EUR-USD's price action, dipping to a low of 1.6915 before rebounding to the 1.6930 area. As seen in EUR-USD on the pair's short-lived approach to 1.4000 yesterday, there had been a big show of selling interest in Cable into 1.7000, and this seems to have taken the wind out of sterling's sails for now. We remain sterling bullish, however, and we expect to see good demand on dips 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.. The 1.7000 is the key level of the moment, a big psychological level and is reportedly a big option barrier.

    [USD, CHF]
    EUR-CHF has consolidated in the upper 1.21s after recovering from the mid-121s earlier in the week, 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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