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By XE Market Analysis April 10, 2014 6:55 am
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    XE Market Analysis: North America - Apr 10, 2014

    The USD saw fresh lows against the EUR, JPY, AUD, and other currencies, extending declines seen in the wake of the FOMC minutes yesterday. EUR-USD logged a 17-day high of 1.3875, USD-JPY made a three-week low of 101.42, AUD-USD hit a fresh four-month of 0.9462, and Cable made a two-month peak of 1.6620. The trend was aided by more hawkish sounding BoJ-speak in the case of USD-JPY, a stellar employment report out of Australian in the case of AUD-USD, while Cable posted a fresh trend high after strong U.K. house price data. In the mix was China's March trade report, where unexpected weakness in exports and a sharp drop in imports fed concerns about economic slowdown, which rattled markets in Asia, but this was downplayed by many market analysts, who pointed out that exports were 8% higher when a sharp 42% drop in exports to Hong Kong and Taiwan (apparently due to over-invoicing a year ago) are stripped out.

    [EUR, USD]
    EUR-USD logged a 17-day high of 1.3875. The move reflects general dollar heaviness that's been in place since last Friday's U.S. jobs report and which was compounded by yesterday's FOMC minutes. Additionally, recent ECB-speak has been emphasizing that any further easing by unconventional methods is more of a possibility under consideration than a probability, and this has helped underpin the EUR this week. The 1.3870 level and 1.3876 (Mar-24 high) offer key nearer-term resistance levels.

    [USD, JPY]
    USD-JPY made a three-week low of 101.42. The yen was underpinned after BoJ's Miyao said that Japan's economic recovery is becoming more broad-based, which further eroded expectations for further monetary stimulus. The breach of the 200-day moving average at 101.61 was a bearish development, swinging March lows at 101.20 into scope. Bigger picture, USD-JPY's recent sharp turn lower after failing to hold levels above 104.00 has reaffirmed the pair's 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 extended to a fresh high of 1.6820 during the Asia session today following the release of the RICS house price balance for March, which was much stronger than expected with a headline balance of +57%, up from 47% in the prior month. This followed official U.K. production data earlier in the week that had smashed expectations and led to upward tweaks in Q1 GDP forecasts. The high in Cable stalled a couple of pips shy of the Feb-17 major-trend peak at 1.6822. Last week's March PMI surveys had disappointed relative to market expectations, but the data still points to healthy expansion in the economy, while the subsequent release of the more laggard official production data suggests GDP growth may be a little higher this quarter than previously anticipated. We anticipate Cable will break above 1.700 over the coming period..

    [USD, CHF]
    EUR-CHF has settled back below 1.2200 again, after making a two-month high of 1.2249 last Friday. The recent up-move reflected an unwinding of the Swiss franc's safe-haven premium, though lower stock markets, persisting geopolitical concerns with Russia, and weak China trade data have reversed this. The cycle low of 1.2104 is a key support, while below 1.2100 the risk of SNB intervention would ratchet up.

    [USD, CAD]
    USD-CAD logged an three-month low of 1.0858 on Wednesday after breaking the Feb-19 low of 1.0910 and 1.0900. Price action has been bearish over the last week, which would be reinforced by a weekly close under 1.0900-10. We would advise some caution as the Fed vs BoC stance should remain broadly supportive of USD-CAD.

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