Home > XE Currency Blog > XE Market Analysis: North America - Aug 10, 2015

AD

XE Currency Blog

Topics4285 Posts4330
By XE Market Analysis August 10, 2015 6:17 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 2947
    XE Market Analysis: North America - Aug 10, 2015

    EUR-USD edged out a six-day high of 1.0981 during the European AM session, breaching Friday's high at 1.0978, before retreating below 1.0950. The euro was temporarily lifted by a surge in Greek shares as a bailout deal with creditors edges nearer. However, Friday's post-U.S. jobs report 'on-the-fact' dollar sell-off is not likely to sustain with Fed funds futures having moved to fully discount a 25 bp Fed rate hike at the September FOMC. EUR-CHF eked out a new high of 1.0790, the best seen since late February. USD-JPY lifted above 124.70 after opening near 124.20, as Japanese and most Asian stock markets managed to post gains, despite Fed tightening expectations and ugly Chinese trade data. Japanese consumer confidence also fell to 40.3 from 41.7, the second lowest reading on the year and highlighting the impact of last year's sales tax increase is having, and the challenge policymakers will have in their plans to raise the tax again in 2017. Japan's current account and trade data, meanwhile, showed that the surpluses in both shrank in June, coming in below market forecasts. AUD-USD dropped nearly 50 pips in making a low at 0.7355, affected by heavy commodity markets.

    [EUR, USD]
    EUR-USD edged out a six-day high of 1.0981 during the European AM session, breaching Friday's high at 1.0978, before retreating below 1.0950. The euro was temporarily lifted by a surge in Greek shares as a bailout deal with creditors edges nearer. However, Friday's post-U.S. jobs report 'on-the-fact' dollar sell-off is not likely to sustain with Fed funds futures having moved to fully discount a 25 bp Fed rate hike at the September FOMC. We remain dollar bullish, and anticipate EUR-USD will re-focus on the Jul-8 low at 1.0808, which is the lowest traded since late April. Resistance is at 1.0981-1.1000, and the 100-day moving average is at 1.1032.

    [USD, JPY]
    The yen cam under pressure against the dollar and euro, underperforming amid a backdrop of mostly higher stock markets in Japan and Asia. A big rally in Greek stocks on signs that Athens is heading nearer to a bailout deal with creditors is boosting EUR-JPY, which touched an 11-day peak, as Grexit risks recede, although other European markets declined. Asian stock markets managed to post gains despite Fed tightening expectations and ugly Chinese trade data. The Chinese data showed exports and imports dove over 8% y/y in July, and PPI fell 5.4% y/y, its biggest drop since 2009. But speculation that Beijing will speed up mergers of state owned companies helped underpin share markets, while Japan's Nikkei was supported by earnings reports, and the Australian market was boosted by a strong rebound in bank shares, helping the main index rebound from Friday's dive, which was the biggest one-day decline since May 2012. The yen has also been affected by Japanese data today, which saw consumer confidence fall to 40.3 from 41.7, the second lowest reading on the year and highlighting the impact of last year's sales tax increase is having, and the challenge policymakers will have in their plans to raise the tax again in 2017. Japan's current account and trade data, meanwhile, showed that the surpluses in both shrank in June, coming in below market forecasts.

    [GBP, USD]
    Sterling has remained with a heavy bias in early week trade after dropping across-the-board following last Thursday's BoE data dump. The main takeaway from the BoE MPC's 'Super Thursday' was that near-term inflation is seen remaining very benign over the next six months, employment is growing more slowly than expected, although at still robust levels, and the 3.5% appreciation in the trade-weighted value of sterling since May has been causing moderate tightening in real interest rates, enabling nominal interest rates to remain low for longer. This offset an upward revision in GDP and a generally upbeat view of economic prospects. The market had been favouring that next February would market rate lift-off, but this is view is now being pushed back to March and into early Q2. We see further downside for Cable over the near-term, with the Jul U.S. jobs report cementing expectations for a Fed tightening in September. Key support is marked by the 100- and 200-day moving averages, which are at 1.5367 and 1.5385, respectively.

    [USD, CHF]
    EUR-CHF eked out a new high of 1.0790, the best seen since late February. The highest level traded since the sharp franc appreciation in January, following the SNB's abandonment of the former 1.20 limit, was 1.0810, which was seen on Feb-20. The reduction on Grexit risk has been a fundamental factor underpinning, and there has been market talk of SNB intervention, too. The unexpected decline in Swiss CPI to a new cycle low of -1.3% y/y in July data, which was released last week, will have maintained the SNB's desire to see the currency at lower levels.

    [USD, CAD]
    USD-CAD has recovered above 1.3100 after Friday's dip to 1.3048. Focus remains on last Wednesday's 11-year high at 1.3213. With the Fed set to hike interest rates in September and oil prices remaining heavy (NYMEX front-month posted a new low on Monday), we expect USD-CAD's bias will remain to the upside. Regarding oil, oversupply is the dominant fundamental theme, with OPEX nations pumping at near record levels to maintain market share, while post-nuclear deal oil flows are being seen from Iran. U.S. output is also high. The 1.3300 level is the next big-picture target for USD-CAD, with 1.3048-50 marking near-term support.

    Paste link in email or IM