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By XE Market Analysis April 28, 2014 6:44 am
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    XE Market Analysis: North America - Apr 28, 2014

    The dollar came under pressure against the euro, yen, sterling and other currencies. The main driver appeared to be EUR-JPY, which surged over 100 pips in reclaiming the 142.00 level for the first time in three weeks. EUR-USD spiked to the high 1.38s, breaching last week's highs on route and making a two-week peak of 1.3879, which is over 50 pips up on last week's closing levels. A large macro fund was reportedly been on the bid in EUR-USD, and buy stops were trigged through 1.3850, while there was also market talk of a reserve manager buying euros more generally. The rise in the euro came despite some more dovish rhetoric form ECB members. USD-JPY rebounded quite sharply on the coattails of EUR-JPY from 102.04, making 102.38. Cable rose on M&A news, with Pfizer of the U.S. said to be nearing a deal to buy the U.K.'s AstraZeneca, which would be the biggest takeover of a British firm on record if it went through (around GBP 51.5 bln, reportedly). The U.K. Hometrack April house price figure also came in above expectations at +0.6% m/m and 6.0% y/y. Cable clocked a peak of 1.6854, having rallied from sub 1.6790 levels.

    [EUR, USD]
    The euro rallied across the board during the European AM. EUR-JPY surged over 100 pips in reclaiming the 142.00 level for the first time in three weeks. EUR-USD spiked to the high 1.38s, breaching last week's highs on route and making a two-week peak of 1.3879, which is over 50 pips up on last week's closing levels. A large macro fund was reportedly been on the bid in EUR-USD, and buy stops were trigged through 1.3850, while there was also market talk of a reserve manager buying euros more generally. The rise in the euro came despite some more dovish rhetoric form ECB members. Despite the recent perkiness, we continue to favour the downside in EUR-USD as the ECB is desirous of a weaker euro and with disinflation likely to persist in the Eurozone. 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 pegged at 1.3884 (Apr-13 peak) and 1.3900-1.3905 (the latter of which is the Apr-11 high), ahead of the Mar-13 major-trend peak at 1.3966.

    [USD, JPY]
    The yen has come under some pressure, led by EUR-JPY, which surged over 100 pips in reclaiming the 142.00 level for the first time in three weeks. This action helped USD-JPY rebound quite sharply after dipping to 102.04, rising to 102.38. There didn't appear to be any news or data behind the move, which may have been driven by a sovereign reserve manage buying, according to market talk. Japan retail sales for March in face came in above expectations at +11.0% y/y, though this likely reflected consumers front-loading purchases ahead of the early April imposition of the three percentage point rise in sales tax. Overall, USD-JPY 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]
    Sterling rose on M&A news, Monday, with Pfizer of the U.S. said to be nearing a deal to buy the U.K.'s AstraZeneca, which would be the biggest takeover of a British firm on record if it went through (around GBP 51.5 bln, reportedly). The U.K. Hometrack April house price figure also came in above expectations at +0.6% m/m and 6.0% y/y. Cable clocked 1.6854, rising from sub 1.6790 levels. We have been targeting Cable to 1.7000 as we see the U.K. economic recovery holding strong into Q3. The first estimate of U.K. Q1 GDP is up tomorrow, which we expect at +0.9% q/q for 3.2% y/y (medians same), up from respective 0.7% and 2.7% outcomes in Q4 data.

    [USD, CHF]
    EUR-CHF has settled around 1.2200 again, having recovered from the one-month low of 1.2142 that was earlier in the month. The cycle low of 1.2104 and 1.2100 are considered key support levels. While situation in the Ukraine remains a concern, and a potential 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 repeated last Friday that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD has settled 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 following the drop from 12.0-plus levels. We would advise caution to CAD bullish views 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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