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By XE Market Analysis April 27, 2015 6:54 am
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    XE Market Analysis: North America - Apr 27, 2015

    The euro gave back of last week's gains as Greek concerns flowed after last week's ebb. EUR-USD dipped to a low of 1.0821 from the upper 1.08s. EUR-JPY and other euro crosses came under moderate pressure, too. Sterling has been in correction mode after Friday's strong rally against the dollar to an eight-week high at 1.5188. The pair has drifted to a low of 1.5122 so far.

    [EUR, USD]
    EUR-USD came under pressure in Europe after trading steadily during Asian's session. The pair has dipped to 1.0822 from the upper 1.08s. The intraday peak was short of Friday's 1.0900 peak. Support is at 1.0845 and 1.0769, which is the current position of the 20-day moving average. Resistance is at 1.0897-1.0900, which encompasses the 50-day moving average and Friday's peak. We continue to take a bearish bigger-picture view of EUR-USD, seeing scope for an eventual more on parity, even if Grexit fears were to abate. We expect the U.S. economy to grow out of its recent soft patch (partly caused by inclement weather and a port strike on the west coast), which would in turn firm up expectations about the timing of Fed tightening. Such as scenario, we feel, would fuel the next bearish phase of EUR-USD.

    [USD, JPY]
    USD-JPY settled around 119.20-30 area after lifting from a one-week low at 118.77, which was seen during Tokyo trade. This still leaves the dollar below its 20-, 50- and 200-day moving averages. The latter of these averages is just above spot at 119.29. The Apr-20 low at 118.53 and the Mar-26 low at 118.33 mark key supports. Bigger-picture momentum still looks fairly flat, with the pair having been in a broadly sideways trading pattern since early December, which has roughly been 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 at a recent Bloomberg survey expecting this, while there is a majority who still expect an expansion in stimulus by the end of October. BoJ Kuroda said in a speech on Apr-19 said that while the "underlying trend of inflation has improved...low inflation momentum" is threatening to pull inflation expectations lower.

    [GBP, USD]
    Sterling has been in correction mode after Friday's strong rally against the dollar to an eight-week high at 1.5188. The pair has drifted to a low of 1.5130 so far, which has been driven by a broader rebound in the dollar. Cable's rally over the last couple of weeks has been technically significant, breaching above both the 20- and 50-day moving averages, and the Mar-18 peak at 1.5169. The 200-day moving average at 1.5181 and 1.5200 now marks resistance. A generally softer dollar, up until today, was the main driver, though the upbeat tone of the BoE minutes from the April MPC meeting provided some sterling-specific support. This week's UK data releases are likely to be firm, on net, though the looming May-7 UK election should be a consideration for sterling traders and UK asset investors 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 lower 1.03s after surging on Wednesday from the mid-1.02s. A high was left at 1.0427. 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." We advise caution in trading long franc positions. SNB Chairman Jordan said today that the franc is "significantly overvalued" and that "we will remain active in the foreign exchange market as necessary in order to influence monetary conditions."

    [USD, CAD]
    USD-CAD has settled in the mid-to-upper 1.21s after making a one-week low of 1.2103 on Friday, which swung the Apr-17 three-month low at 1.2088 back into scope. Gains last week above the 200-day moving average, presently situated at 1.2251, failed to sustain. The sharp in mi-Apri from levels near 1.2700 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 $10 rise in oil prices. That fall in USD-CAD 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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