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By XE Market Analysis April 7, 2015 6:26 am
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    XE Market Analysis: North America - Apr 07, 2015

    EUR-USD dove though both Monday's and Friday's lows in making a 1.0834 low as returning European participants picked up dollars. Stops through 1.0900 played a notable part in driving the move. Yield differentials between the U.S. and Eurozone also haven't changed too much since the U.S. payrolls disappointment on Friday. The market has now lost clear direction. Expectations that the Fed might delay its tightening to September, if not 2016, has left the dollar somewhat rudderless for now. USD-JPY rallied to a six-day peak of 120.06 amid a EUR-USD led rebound in the dollar. The pair subsequently settled in the high 119s. Elsewhere, AUD-USD bolted higher after the RBA refrained from easing at its policy review today. The OIS market had been factoring 70-80% odds of there being a 25 bp easing. AUD-USD clocked a nine-day high of 0.7711.

    [EUR, USD]
    EUR-USD dove though both Monday's and Friday's lows in making a 1.0834 low as returning European participants picked up dollars. Stops through 1.0900 played a notable part in driving the move. Yield differentials between the U.S. and Eurozone also haven't changed too much since the U.S. payrolls disappointment on Friday. The market has now lost clear direction. Expectations that the Fed might delay its tightening to September, if not 2016, has left the dollar somewhat rudderless for now. The euro, meanwhile, has the ongoing Greek saga to content with. Greece promised not to default on the upcoming IMF repayment, though the risk of Grexit continues loom as negotiations with creditors drag on. EUR-USD's 20-day moving average is now at 1.7915. Resistance is at 1.0900-10 and 1.1035 (Monday's peak) and 1.1073 (50-day moving average).

    [USD, JPY]
    USD-JPY rallied to a six-day peak of 120.06 amid a EUR-USD led rebound in the dollar. The pair subsequently settled in the high 119s. The technical picture is mixed after a choppy period of trade. Expectations that the Fed might delay its tightening to September, if not 2016, has left the dollar somewhat rudderless for now. USD-JPY resistance is at 120.15 (20-day moving average), and on the downside the 50-day moving average is at 119.49. We still think that the BoJ is on course for an eventual easing while the Fed still remains on course for an eventual tightening, though this bullish USD-JPY view won't much have bearing over the immediate period ahead. Range trading is preferred for now.

    [GBP, USD]
    Sterling should remain on a relatively firm footing against both the dollar and the euro as UK data should continue to show health economic momentum and tightening labour market conditions, though upside potential will likely be curtailed into the May-7 election. The services PMI for March came in today much stronger than expected at 58.9 in March, an seven-month high and up from 56.7 previously. The median forecast had been for a more modest rise to 57.0. The looming election, however, brings concerns of a hung parliament outcome, particularly as the SNP (Scottish Nationalist Party) could end up holding the balance of power. Cable support is at 1.4830.

    [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 remained under 1.2500 as crude prices remained over the key $50 mark. The pair has settled lower after peaking last Tuesday at 1.2784. 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 jobs report, weakness in which was more about mean reversion than change of trend. 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 1.1429-30.

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