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By XE Market Analysis April 22, 2015 6:47 am
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    XE Market Analysis: North America - Apr 22, 2015

    EUR-USD clocked two-day highs in touching 1.8000, which marked a gain of about 70 pips from yesterday's closing level and extended the recovery from the six-day low at 1.0659. Behind the euro's rally today is an abatement in Grexit concerns, at least over the nearer term. ECB's Coeure spoke of "tangible progress in the quality of the discussions" between Greece and its creditors in recent days, though "significant differences on substance remain." A Eurogroup official was also cited as saying that while liquidity is tight, Greece should have sufficient financing through to June's deadline. Sterling rallied on the MPC minutes to the April meeting, which noted that all members agreed that a repo rate hike was more likely than not over the three-year forecast period and that two members regarded the decision as finely balanced. AUD-USD rallied to a two-day high of 0.7807 on Australian CPI data, which in Q1 rose 0.2% q/q and 1.3% y/y, both in line with median forecasts, though the trimmed mean CPI rose to 2.3% y/y, above the 2.2% y/y rate expected.

    [EUR, USD]
    EUR-USD clocked two-day highs in touching 1.8000, which marked a gain of about 70 pips from yesterday's closing level and extended the recovery from the six-day low at 1.0659. The move high has taken out the 20-day moving average at 1.0772. The 1.0848 Apr-17 high provides the next upside marker. Behind the euro's rally today is an abatement in Grexit concerns, at least over the nearer term. While it's now clear that there won't be a deal at Friday's Eurogroup meeting, ECB's Coeure said in a newspaper interview today that "tangible progress in the quality of the discussions" between Greece and its creditors in recent days. Not to sound overly optimistic Coeure added that "significant differences on substance remain and substantial further work is needed."

    [USD, JPY]
    USD-JPY has consolidated in the mid-to-upper 119s, remaining below yesterday's one-week high at 119.79. The convergence of the 20-, 50 and 200-day moving averages, presently sitting at 119.64, 119.80 and 119.30, respectively, indicates the broad lack of direction of USD-JPY, which has been entrenched in a sideways trading pattern since early December. There has been nascent speculation that the BoJ may taper its QQE program in 2016, though this is a minority view with just four out of 32 respondents to a Bloomberg survey expecting this, while there is a majority who still expect an expansion in stimulus by the end of October.

    [GBP, USD]
    Sterling rallied on the MPC minutes, which noted that all members agreed that a repo rate hike was more likely than not over the three-year forecast period. The minutes also noted that two members regarded the decision as finely balanced (most likely the relatively hawkish-leaning Weale and McCafferty). The MPC also dropped the reference seen in the March minutes that the strength of sterling (which is up 15% y/y) could have potential to prolong the period for which CPI would remain below target, though it was noted that currency strength could curb exports and supress food prices. The MPC now noted hat currency strength may have fed through quicker than expected, which could mean less downward pressure on prices to come and a faster pickup in inflation when the effects of recent falls in energy and food prices dropped out of y/y comparisons. Cable sprang over 70 pips on this, to five-day high of 1.5014. The 50-day moving average at 1.5037 and last Friday's peak at 1.5053 provide the next upside markers. EUR-GBP fell back toward intraday lows under 0.7190, despite concurrent EUR-USD strength. Uncertainties about the May-7 general election should curb sterling's upside potential, all else equal.

    [USD, CHF]
    EUR-CHF rallied to an eight session high of 1.0394 in N.Y. trade on Wednesday. The move came after the SNB said it would reduce the number of institutions exempt from negative interest rates on sight deposits. USD-CHF rallied nearly 200 points to just under 0.9700. The SNB move likely opens the door for more negative rates in the near future, perhaps to offset a potential Greece EMU exit.

    [USD, CAD]
    USD-CAD has this week recovered to and settled around its 200-day moving average at 1.2236 after making a three-month low at 1.2088 last Friday. Last week's sharp decline (the pair had opened near 1.2570) followed a run of weaker U.S. data and the BoC's downplaying of the oil price shock on the Canadian economy, which was backed up by a decent rally in oil prices. USD-CAD's down move is technically significant as it smashed the series of range lows established over the last four months in the 1.2351 to 1.2400 region. These levels now revert as strong resistance markers, while the overall bias is likely to remain lower. A big-picture support region is at 1.1950-1.2000.

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