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By XE Market Analysis April 13, 2018 6:29 am
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    XE Market Analysis: North America - Apr 13, 2018

    The yen weakened, while sterling and the Australian dollar outperformed and the dollar trade mixed. The other commodity currencies also posted moderate gains. AUD-JPY was showing the biggest gain, as of the late London morning, with the cross showing a gain of 0.7%, logging a one-month peak at 83.99. AUD-JPY is widely view as a forex market barometer on sentiment global markets, so the gains can be linked to the lifting in investors' spirits with regard to latest evolutions in the Sino-U.S. trade spat and Russia-U.S. faceoff in Syria. AUD-USD also logged a one-month high. USD-JPY lifted to a fresh six-week high of 107.67, while EUR-JPY lifted toward trend highs. The Nikkei closed some way off its highs following a late-morning selloff, but still with a 0.55% gain, and Europe's EuroStoxx 50 was showing a 0.2% gain. Trump's U-turn on TPP went down well in most equity markets. EUR-USD settled in the mid 1.2300s. Cable logged a 10-week high at 1.4295 while EUR-GBP broke lower, to 11-month lows.

    [EUR, USD]
    EUR-USD has settled in the mid-to-low 1.2300s after a four-day run higher capped out on Wednesday at 1.2397. While price action during the first half of the week fitted talk of there being a sell-dollars-into-gains view following the big U.S. jobs report miss of last week, much weaker than expected industrial production data provided fresh evidence of there being a notable economic slowdown in the Eurozone, which, along with ECB policy-meeting minutes showing that most members are not convinced that inflation is on a sustained path higher, have weighed on EUR-USD. In the bigger view, the pair remains near the midway levels of a broad consolidation range that's been seen for some two months now, which has followed a 14-month rally phase from sub-1.0500 levels. More of the same seems likely, with the odds for a big-picture breakout seeming low at the present time.

    [USD, JPY]
    USD-JPY lifted to a fresh six-week high of 107.67, while EUR-JPY lifted toward trend highs and AUD-JPY clocked a one-week high at 83.99. An ongoing stock market rebound in global markets aided the yen lower as more of its safe haven premium unwound. The Nikkei closed with a 0.55% gain. News and data were thin on the ground today in Japan and Asia. The latest price action affirms an upside trend that's been in development for two weeks now, from mid 104.00 levels, with this week set to make it the third consecutive week with a higher high and higher lower. The pair needs to close today above 106.92 to make this the third successive week with a higher closing peak.

    [GBP, USD]
    The pound has rallied for a sixth consecutive session, with Cable posting a 10-week high at 1.4295 and EUR-GBP triggering stop-loss orders through 0.8650-60 on route to posting 11-monht lows under 0.8630. GBP-JPY, meanwhile, has seen a fresh two-month high. There doesn't appear to be an specific news development or data that has been driving the up move today. Cable looks set to make this the fifth out of the last six weeks it has rallied, but would need to breach and close above the January high at 1.4345 to generate a sense of potential for a move on 1.5000. The pound is now up by an average of 3.1% versus the dollar, euro and yen on the year-to-date, which reflects a moderation in the Brexit discount following the EU and UK's agreement on divorcing terms and agreement on a 21-month post-Brexit transitory period. Data released yesterday also showed a drop in the UK's trade deficit, which should lift Q1 GDP growth. Cable has trend support at 1.4194-96.

    [USD, CHF]
    EUR-CHF has broken sharply higher this week, yesterday extending to a fresh 39-month high at 1.1889. A background support for the cross are expectations for the SNB to remain strongly committed to negative interest rates, until after the ECB starts tightening. SNB board member Maechler recently bemoaned a still "highly valued" currency and argued that premature tightening in monetary policy would be counterproductive. EUR-CHF has rallied nearly 11% from mid last year. We have a long standing target for the cross to return to the 1.2000 level, which was the SNB's cap that was abandoned back in January 2015.

    [USD, CAD]
    USD-CAD remained heavy after posting a fresh eight-week low on Wednesday at 1.2544. A surge in oil prices this week to 40-month highs has given the Canadian dollar a boost, helping offset disappointment from the news that an announcement on the NAFTA renegotiation will be delayed. The latest price action in USD-CAD affirms a downside trend that's been developing over the last three weeks, from levels above 1.3100, and we expect more downside. Initial resistance is at 1.2634-36.

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