Home > XE Currency Blog > XE Market Analysis: North America - Aug 14, 2014

AD

XE Currency Blog

Topics6538 Posts6583
By XE Market Analysis August 14, 2014 6:26 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4496
    XE Market Analysis: North America - Aug 14, 2014

    The dollar came under moderate pressure today. EUR-USD rallied some 30 pips after expectedly weak Eurozone data, making an intraday high of 1.3396. Eurozone July HICP inflation was confirmed at 0.4% y/y, as expected, while the preliminary Eurozone Q2 GDP estimate dropped to 0.0% q/q from 0.2% growth in Q1. The rebound in EUR-USD was an on-the-fact bout of profit taking on expectedly weak data, which seemed to spark a broader dollar correction. USD-JPY dipped to a low of 102.32, more than unwinding Tokyo session gains to a six-day peak of 102.66. Cable extended to a fresh two-month low before finding a toehold amid the generally softer dollar environment. USD-CAD breached below 1.0900 for the first time since Aug-1.

    [EUR, USD]
    EUR-USD is higher after expectedly weak Eurozone data, aided by a generally softer tone in the dollar. EUR-USD jumped about 30 pips to an intraday high of 1.3396. Eurozone July HICP inflation was confirmed at 0.4% y/y, as expected, while the preliminary Eurozone Q2 GDP estimate dropped to 0.0% q/q from 0.2% growth in Q1, below the 0.1% consensus forecast but not a surprise following the 0.2% q/q dip in German GDP. The rebound in EUR-USD was an on-the-fact bout of profit taking on expectedly weak data, which seemed to spark a broader dollar correction that has seen USD-JPY, for instance, dip to a low of 102.32, more than unwinding Tokyo session gains. EUR-USD resistance is marked at 1.3415 (yesterday's peak) and 1.3432 (Friday's high). Price action has been turning less bearish since making a nine-month low on Aug-6. A JP Morgan model reckons the euro is 5% undervalued.

    [USD, JPY]
    USD-JPY dropped back towards 102.30 after extending to a six-day high of 102.66. The high was seen during the Tokyo session following sub-expectations Japanese machinery orders data. The data follows the 6.8% q/q drop in Japanese Q2 GDP and the release of the BoJ minutes to the July 14-15 policy meeting, which showed most members remained committed to QQE as long as necessary. USD-JPY's drop back below the 200-day moving average at 102.38, though we remain bullish, assuming that geopolitical concerns remain contained. Support is marked at 102.17-20 and 102.00-10 (which encompasses the 100-day moving average).

    [GBP, USD]
    Cable briefly traded below the 200-day moving average at 1.6664 in logging a four-month low at 1.6657, since recovering above 1.6680. This is the first time sterling has ventured below the 200-day average since September 2013. We see potential for Cable to trade as low as 1.6500 in the period ahead, though with U.K. growth expected at 3%-plus this year (consensus is 3.0%, BoE view is 3.4%) we don't seen too much bearish potential beyond here. Key will be at what point in the ensuing recovery we start to see wages pick up, which the BoE said in its Inflation Report yesterday is the key metric being monitored with regard to the timing of a rate hike. BoE MPC member Miles said U.K. growth remains good and that the recovery is not stagnating, and while the degree of slack in the economy means that interest rates can stay low, he also expects wages to rise to a +2% growth pace "soon." Cable resistance is now marked at 1.6725, 1.6766 (last week's low) and 1.6800.

    [USD, CHF]
    EUR-CHF remains heavy, pressing below 1.2130 again. The cross last Friday made a five-month low at 1.2121, which now marks support, ahead of the cycle low at 1.2104 and 1.2100, which are key support levels. We would expect that the threat of SNB intervention into its 1.2000 peg to deter franc buying below 1.2100. SNB's Jordan repeated recently that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD has breached last week's low at 1.0903, which is another affirmation of an evolving bearish bias. Last Friday's rally had stalled a few pips shy of the Aug-6 three-month peak at 1.0986, leaving the 1.1000 level untroubled and painting a less bullish technical picture following a two-week rally phase. The recent oscillations within 1.0900-1.1000 are starting to look like a double top formation, which signals reversal potential to 1.0800. Key support is marked by a confluence of the 20-, 100- and 200-day moving averages, contained within 1.0860-1.0870.

    Paste link in email or IM