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By XE Market Analysis April 23, 2015 6:18 am
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    XE Market Analysis: North America - Apr 23, 2015

    EUR-USD rebounded over 70 pips from a two-day low at 1.0667 in reaching 1.0740 as the Grexit risk premium unwound some after a Greek government official said they are expecting a positive signal from the Eurogroup meeting in Riga tomorrow, adding that a deal is close. Creditor officials, however, have been urging more progress. Sub-expectations Eurozone PMI had earlier weighed on the euro. Erratic trade in EUR-USD, which clocked a two-day low today after clocking a two-day high yesterday, looks likely to continue. Cable logged an intraday low at 1.4959 on a UK retail sales miss, though subsequently recouped above 1.5000 on the coattails of EUR-USD's rally. EUR-GBP, meanwhile, recovered about half of yesterday's post-BoE minutes losses. USD-JPY has posted a fourth consecutive up day, reaching a nine-day peak of 120.09. Elsewhere, the NZD declined notably after RBNZ assistant governor said that the central bank is not considering a further interest rate increases.

    [EUR, USD]
    EUR-USD has rebounded over 70 pips from a two-day low at 1.0667 in reaching 1.0740 as the Grexit risk premium unwound some after a Greek government official said they are expecting a positive signal from the Eurogroup meeting in Riga tomorrow, adding that a deal is close. Creditor officials, however, have been urging more progress. Erratic trade in EUR-USD, which clocked a two-day low today after clocking a two-day high yesterday, looks likely to continue.. Yesterday's peak at 1.0800 and the 20-day moving average at 1.0762 mark resistance, while support is at 1.0659-67. Yield differentials between the U.S 10-year T-note versus Bund have remained steady, near the 180 bp mark in the dollar's favour. Bigger picture, the initial impact of the ECB's looser policy stance has faded since EUR-USD hit a 12-month low in March, even despite the recent spike in Grexit odds. We still take a bearish view of EUR-USD, seeing scope for an eventual more on parity, as we think the U.S. economy will grow out of its recent soft patch (partly caused by inclement weather and port strike on the west coast), which will in turn firm up expectations about the timing of Fed tightening.

    [USD, JPY]
    USD-JPY has posted a fourth consecutive up day, reaching a nine-day peak of 120.09. The dollar has breached above 20-, 50 and 200-day moving averages this week, though bigger-picture momentum still looks fairly flat, with the pair having been in a broadly sideways trading pattern since early December, which has been roughly centred on 120.00. 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. BoJ boss Kuroda said today that a QQE exit is not being considered, though the technical details of an exit are. On CPI, he stuck to the boilerplate is saying that he expects inflation to pick up in the second half of the financial year, though the 2% target may not be achieved until early in the next financial year.

    [GBP, USD]
    Sterling traded lower on a UK retail sales miss. Cable logged an intraday low at 1.4959, though since recouped above 1.5000 on the coattails of a gain in EUR-USD. EUR-GBP, meanwhile, recovered about half of yesterday losses, which had been seen on the back of the upbeat tone of the April BoE MPC minutes. March retail sales unexpectedly fell 0.5% m/m, contrary to the median forecast for a 0.4% m/m increase. The y/y figure came in with a 4.2% gain, down on the median for 5.7%. February data were also revised lower. Overall, a disappointing report, though underlying momentum remains good and trending improvements in real wages on the back of a strengthening labour market suggest the outlook will remain pretty solid. Cable resistance is marked at 1.5000 and 1.5030 (50-day moving average). The May-7 UK election should be a consideration for sterling investors and traders given prevailing outcome uncertainties. We also expect the U.S. economy to grow out of its recent soft patch as one-off impacts (inclement weather, port strikes) fade.

    [USD, CHF]
    EUR-CHF has settled in the upper 1.03s after surging on Wednesday from the mid-1.02s. The move was ignited by the SNB's decision to expand the number of groups subject to negative rates on deposits at the central bank. The SNB said at its March policy review that the franc is "significantly overvalued," and would "remain active in the foreign exchange market, as necessary."

    [USD, CAD]
    USD-CAD has this week recovered to and settled around its 200-day moving average at 1.2245 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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