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By XE Market Analysis April 7, 2014 6:52 am
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    XE Market Analysis: North America - Apr 07, 2014

    No too much net change in quiet trade. EUR-USD popped higher on ECB-speak by Nowotny and USD-JPY recovered to the 103.30 after dipping below 103.00 for the first time since last Tuesday. EUR-USD lifted to 1.3720 after earlier trading just under 1.3700. The market lacked the muster for a test of Friday's 1.3731 high. ECB's Nowotny siad that there is no need for immediate ECB action and that the central bank is assuming that economy recovery will reduce the risk of deflation. USD-JPY dipped to a low of 102.99 after closing last week around 103.25. The pair subsequently recovered to the 103.30 area. AUD-USD dipped slightly, to a low of 0.9271, before settling at near net-unchanged levels around 0.9290. Geopolitical concerns blipped on market radar screens once again on news that pro-Russian protestors in eastern cities in the Ukraine seized state buildings, which Kiev said was the work of Putin.China markets were closed for a public holiday today.

    [EUR, USD]
    EUR-USD lifted on ECB-speak, with Nowotny saying that is no need for immediate ECB action and that the central bank is assuming that economy recovery will reduce the risk of deflation. The euro popped to 1.3720. The day's low was seen during Asian trade, at 1.3696, so a narrow range overall. Friday's high at 1.3731 is now in scope We have been favouring a lower EUR-USD over time, targeting 1.3500 and below. This view is based on the divergence between Fed and ECB policy paths, with the former having already signalled that a rate hike is on the horizon while the latter remains embroiled with fighting a threat of deflation. EUR-USD resistance is marked at 1.3770 and 1.3800-15.

    [USD, JPY]
    USD-JPY dipped to a low of 102.99 after closing last week around 103.25. The pair subsequently recovered to the 103.30 area. We remain yen bearish. The currency has been trending lower since the start of the new fiscal year in Japan, and markets continue to anticipate a further BoJ easing to offset the sales tax hike that was implemented last week. JP Morgan, for instance, is forecasting an easing in July, which matches the market consensus. We target USD-JPY to 105.00.

    [GBP, USD]
    USD-CAD breached and closed last week below 1.1000. The Mar-6 low of 1.0955 is now in scope, and beyond this the Feb-19 low of 1.0910. USD-CAD's mid-March surge to new cycle high of 1.1278 now looks to have been false breakout. Nearer term we are bearish, but don't advise getting too carried away as the Fed vs BoC stance should remains supportive.

    [USD, CHF]
    EUR-CHF has settled lower after making a two-month high of 1.2249 on Friday. The up move reflects an unwinding of the Swiss franc's safe-haven premium. The cycle low of 1.2104 was left unchallenged during the recent risk-off phase. We see potential for a recovery to the 1.2300-1.2400 area, but this assumes there are no renewed flare-ups in geopolitical tensions.

    [USD, CAD]
    USD-CAD has steadied around 1.1050-1.1100 after a run lower in recent days that broke below some key support levels, on route to testing 1.1000. USD-CAD's mid-March surge to new cycle high of 1.1278 now looks to have been false breakout. We don't advise getting too carried away with a bearish USD-CAD view as the Fed vs BoC stance remains supportive. Key support levels are pegged at 1.0955 (the Mar-6 low) and 1.0910 (the Feb-19 low).

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