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By XE Market Analysis April 30, 2014 7:16 am
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    XE Market Analysis: North America - Apr 30, 2014

    The euro rebounded from sub-1.38 lows, the yen saw some chop in the wake of the triple header BoJ policy announcement, outlook and press conference, while most other currencies held in comparatively narrow ranges. EUR-USD rebounded from a 1.3774 nadir, seen just ahead of the Eurozone CPI release, to the 1.3815-20 area. Eurozone HICP came in at 0.7% y/y, up from 0.5% in march. Although this was below the median forecast of 0.8%, the market had factored this in after yesterday's German numbers. The rebound in CPI from March, along with ECB-speak, is helping to kill any lingering expectations for a 'big bazooka' ECB policy measure. Elsewhere, USD-JPY dropped to 102.28 before rebounding to the 102.60 area. The yen had been bid in the wake of the BoJ announcement of unchanged policy as this had disappointed some who had been expecting an expansion in the Y60-70 tln annual monetary base expansion, which in the event was left unchanged. The subsequently released BoJ semi-annual report downgraded GDP projections, and BoJ Kuroda said in his press conference that there is some disagreement on the board with regard to when the 2.0% CPI target will be reached.

    [EUR, USD]
    EUR-USD rebounded from a 1.3774 nadir, seen just ahead of the Eurozone CPI release, to the 1.3815-20 area. Eurozone HICP came in at 0.7% y/y, up from 0.5% in march. Although this was below the median forecast of 0.8%, the market had factored this in after yesterday's German numbers. The rebound in CPI from March, along with ECB-speak, is helping to kill any lingering expectations for a 'big bazooka' ECB policy measure. Focus will shift to U.S. developments, which we think should prove dollar supportive. 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 1.3884-1.3900, key supports at 1.3785 (breached briefly today) and 1.3765.

    [USD, JPY]
    USD-JPY dropped to 102.28 before rebounding to the 102.60 area. The yen had been bid in the wake of the BoJ announcement of unchanged policy as this had disappointed some who had been expecting an expansion in the Y60-70 tln annual monetary base expansion, which in the event was left unchanged. The subsequently released BoJ semi-annual report downgraded GDP projections, and BoJ Kuroda said in his press conference that there is some disagreement on the board with regard to when the 2.0% CPI target will be reached. The updated official forecast today predicts CPI rising to 1.9% during the financial year to March 2016, a tad short of the 2.0% 'holy grail' target. Bigger picture , USD-JPY's oscillation within the 102s has persisted for two weeks now. 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. Fundamentals seem more bullish, however, as Fed and BoJ policy paths are likely to become more divergent.

    [GBP, USD]
    We remain sterling bullish. The prelim GDP data out of the U.K. this week came in one tenth of a percentage point below the median expectation in both q/q and y/y measures, though at 0.8% q/q and 3.1% y/y this is still the best growth since Q2 2010, while recent survey evidence is portending solid growth momentum lasting into Q2. We continue to target 1.7000 in Cable. Key support is marked by recent range lows at 1.6765 and 1.6760.

    [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 gave up the chase above 1.1000 and slipped to around 1.0950. There are reports that oil settlement inflows have underpinned the Canadian currency in a relative illiquid market. There doesn't appear to have been a fundamental driver. The Arp-9 three-month low of 1.0858 now swings back into view. Bigger picture, USD-CAD has been in a consolidation phase since late January following a four-month rally period from sub-0.9700 levels. We'd need to see daily and weekly closes below 1.1000 to support the idea that a trend reversal is on the cards.

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