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By XE Market Analysis April 24, 2014 8:10 am
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    XE Market Analysis: North America - Apr 24, 2014

    The euro rose on a strong German Ifo business sentiment reading only to be knocked lower by ECB Draghi's hammer, which took the form of a warning that a worsening inflation outlook would be a trigger for QE. EUR-USD dropped back to near net unchanged levels around 1.3820 after peaking at 1.3343 in the immediate wake of the Ifo release. Elsewhere, USD-JPY continued to oscillate around 102.50, and sterling failed to react to a stronger than expected CBI sales survey. The NZD and AUD were choppy. The NZD-USD rallied to a nine-day peak of 0.8636 during the Wellington session only turn sharply lower and extend to a 0.8565 low during the London AM. A 25 bp rate hike by the RBNZ to 3.0% had elicited kiwi buying, but the tightening had been widely expected and profit taking set in ahead of the ANZAC Day public holiday tomorrow, which will see both Australian and New Zealand markets closed. AUD-USD followed suit, dipping to a near three-week low toward 0.9260. There seemed to be some rotation into CAD, as USD-CAD dipped at the same time the AUD and NZD tumbled.

    [EUR, USD]
    The euro rose on a strong German Ifo business sentiment reading only to be knocked lower by ECB Draghi's hammer, which took the form of a warning that a worsening inflation outlook would be a trigger for QE. EUR-USD dropped back to near net unchanged levels around 1.3820 after peaking at 1.3343 in the immediate wake of the Ifo release. We continue to favour the downside in EUR-USD, partly as the ECB is desirous of a weaker euro. Technically, the rally from last's July 1.2042 low to the early March peak of 1.3966 is waning, as indicated by momentum indicators (particularly apparent on the weekly chart, where there is a strong divergence between underlying momentum and price trend). Resistance is marked at 1.3850-55, support at 1.3785 and 1.3765.

    [USD, JPY]
    USD-JPY has continued to oscillate in the 102s. The pair is lacking direction amid a 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]
    Serling has drifted lower in the wake of the BoE minutes release on Wednesday, even failing to react to a stronger than expected CBI sales survey today. The minutes, to recap, didn't mark much of a departure from the already established dovish policy stance, which was a disappointment to us and some market participants who had been anticipating more of a decisively hawkish tone. Cable has settled in the high 1.67s, down from the week's peak at 1.6839. We continue to target 1.7000 as we see the U.K. economic recovery holding strong into Q3. Support is marked at and 1.6762 and 1.6750.

    [USD, CHF]
    EUR-CHF has settled around 1.2200 again, having recovered from the one-month low of 1.2142 that was seen last on Monday. The cycle low of 1.2104 was left untested. While situation in the Ukraine remains a concern, and this is a potentially supportive factor for the CHF, the threat of SNB intervention into its 1.2000 limit peg is helping to deter franc buying. SNB's Jordan said earlier in the month that Swiss inflation remains "very low," and that the currency cap would still be defended.

    [USD, CAD]
    USD-CAD has settled just above 1.1000 after recovering from the three-month low of 1.0858 that was seen on Apr-9. The failure to make weekly close under 1.0900-10 was disappointing to CAD bulls, to whom we would advise caution as the Fed vs BoC stance should remain broadly supportive of USD-CAD. Resistance is pegged at 1.1059-60 (50-day moving average) and 1.1100 (former pivot level). Support is marked at 1.0985 (20-day moving average) and 1.0942 (Apr-14 low).

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