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By XE Market Analysis April 9, 2015 6:29 am
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    XE Market Analysis: North America - Apr 09, 2015

    EUR-USD traded to a new low for the month at 1.0731 despite news that Greece met IMF debt tranche repayment deadline (according to the WSJ at the time of writing). The dollar has remained firm in the wake of the FOMC minutes, which although showing mixed views among members provided markets a reminder that the Fed remains on track to an eventual tightening. EUR-USD's Mar-30 low at 1.0713 is the next focal point while the 20-day moving average at 1.0804 now marks resistance. USD-JPY ran to a peak of 102.38 during Tokyo trade but turned shy of Tuesday's peak at 120.44 and subsequently tipped back toward 120.00 during the London AM session. The 20-day moving average at 120.06 and the 120.00 level now revert as support levels.

    [EUR, USD]
    EUR-USD traded to a new low for the month at 1.0731 as the dollar finds broad support in the wake of the FOMC minutes to the recent Fed policy meeting, which although showing mixed views among members revealed that both Fed's Dudley and Powell mulled a rate hike as early as June. If nothing else the minutes were a reminder that the Fed remains on track to an eventual tightening. EUR-USD's Mar-30 low at 1.0713 is the next focal point while the 20-day moving average at 1.0804 now marks resistance. We remain dollar bullish in the bigger picture. Last week's sub-expectations March jobs report was more a case of mean reversion after a period of outsized gains from November through to February rather than a signal of a trend change. Signs of a tightening labour market, such as bellwethers McDonald's and Walmart having to pony up higher pay to attract and retrain staff point to a sea change that is occurring in the U.S. economy.

    [USD, JPY]
    USD-JPY ran to a peak of 102.38 during Tokyo trade but turned shy of Tuesday's peak at 120.44 and subsequently tipped back toward 120.00 during the London AM session. The 20-day moving average at 120.06 and the 120.00 level now revert as support levels. The dollar is generally firmer following the FOMC minutes, which although showing discord among members also affirmed that the Fed remains on course for an eventual rate hike -- a stance which contrasts that of the BoJ. The Japanese central bank's monthly economic report was published today to little fanfare, repeating the boilerplate assessment of an economy continuing on a "moderate" recovery path. We expect USD-JPY's bias to remain higher, seeing scope for a return to recent highs in the 121.00-122.00 area

    [GBP, USD]
    Sterling should remain on a relatively firm footing against the euro and broadly steady versus the dollar. 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 this week, for instance, 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 1.4800-07, resistance at 1.4900 and 1.4920.

    [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."

    [USD, CAD]
    USD-CAD firmed to one-week highs above 1.2580 after breaching above the 50-day moving average at 1.2560. 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 1.2522, 1.2500 and 1.2429-30.

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