Home > XE Currency Blog > XE Market Analysis: North America - Apr 02, 2015

AD

XE Currency Blog

Topics7208 Posts7253
By XE Market Analysis April 2, 2015 6:50 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5132
    XE Market Analysis: North America - Apr 02, 2015

    EUR-USD has rallied above 1.0800 to a peak of 1.0844, pressing against Tuesday's high at 1.0845 before settling around 1.0825-30. Stops were a factor as the market positions for tomorrow's U.S. jobs report, especially with European markets being closed for the Good Friday holiday and with the speculative market running an extreme net short exposure to the euro. EUR-USD's rise came as the dollar's yield advantage over the euro dipped back below 170 bp after peaking near 178 bp earlier in the week, with markets pricing in risk that tomorrow's March U.S. payrolls data will show some mean reversion after outsized jobs gains since November. USD-JPY slipped below the Tokyo low in setting a new intraday low at 119.45, leaving yesterday's low at 119.42 and the 50-day moving average at 119.41 unchallenged for now. Sterling traded lower on the construction PMI, which came in much weaker than expected at the headline level. AUD-USD dove to a three-week low of 0.7568 and AUD-NZD hit a new record low during the Sydney session. Re-occurring talk of sovereign ratings downgrade risk, with iron ore prices down some 20% on the month symbolic of the driving force eroding Australia's terms of trade, and expectations of an RBA easing at its Apr-7 policy review are weighing on the Australian currency.

    [EUR, USD]
    EUR-USD has rallied above 1.0800 to a peak so far of 1.0844, pressing against Tuesday's high at 1.0845 before settling around 1.0825-30. Stops were a factor as the market positions for tomorrow's U.S. jobs report, especially with European markets being closed for the Good Friday holiday and with the speculative market running an extreme net short exposure to the euro. The move breached the 20-day moving average. While the Grexit issue remains a wildcard for the euro, we favour the EUR-USD's upside over the nearer term as weaker than expected ISM, ADP, and construction data out of the U.S. supported outlooks for a weak Q1, while tomorrow's March U.S. payrolls data is likely to show some mean reversion after outsized 239k-423k jobs gains since November that have defied moderating GDP growth. The dollar's yield advantage over the euro has already dipped back below 170 bp after peaking near 178 bp earlier in the week. We see scope for EUR-USD rallying to the 1.1000 area.

    [USD, JPY]
    USD-JPY slipped below the Tokyo low in setting a new intraday low at 119.45. Yesterday's low at 119.42 and the 50-day moving average at 119.41 are now key near-term support levels, with the Mar-26 and Mar-27 lows at 118.23 and 118.92 in scope below here. Nearer-term risks remain to the downside as we expect some mean reversion in tomorrow's March U.S. payrolls data after a period of outsized headline increases. USD-JPY resistance is at 119.73-75.

    [GBP, USD]
    Sterling traded lower on the construction PMI, which came in much weaker than expected at the headline level, dipping to 57.8 from 60.1, although was offset by a rise in optimism to a nine-year peak, while there were also signs that activity may pick up once the May-7 election is out of the way. Cable logged intraday lows just under 1.4700 and remains heavy. EUR-GBP drove sterling losses, fitting the firmer EUR-USD picture, spurting back above 0.7300 to a two-day peak of 0.7308 before settling back around the 0.7270-80 area. Concerns of a hung parliament outcome at the May-7 general election, especially as the SNP (Scottish Nationalist Party) may end up holding the balance of power, will keep sterling's on a back foot.

    [USD, CHF]
    EUR-CHF has established a lower trading range below 1.0500. There have been some analyst notes in circulation highlighting further policy options the SNB has available to try and keep a lid on the franc (including cutting rates deeper into negative territory). The SNB said at its March policy review that the franc is "significantly overvalued and should continue to weaken over time," and that, in a shot across the bows of the market, said it will continue to take account of the franc rate situation in policy decisions and "remain active in the foreign exchange market, as necessary." Both the SNB and SECO cut growth forecasts, factoring in the sharp franc appreciation that was seen in January after the central bank abandoned the 1.20 floor in EUR-CHF. The SNB expects growth of just under 1% this year (down from 2% expected previously) and SECO 0.9% (from 2.1%). Key support in EUR-CHF is at 1.0400-1.0422.

    [USD, CAD]
    USD-CAD has re-established itself back under 1.2700 after peaking on Tuesday at 1.2784. The 20-day moving average at 1.2637 has also been breached. Bigger picture, yield differentials should remain a U.S. dollar positive into 2016 as the Fed remains on course to tighten policy, albeit on a less certain timetable than was envisaged before the March FOMC statement. The Mar-17 trend high at 1.2835 and the Aug-2009 high at 1.3063 are bigger picture targets. USD-CAD support is at 1.2556 (50-day moving average) and 1.2500.

    Paste link in email or IM