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By XE Market Analysis August 18, 2014 7:01 am
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    XE Market Analysis: North America - Aug 18, 2014

    Narrow ranges prevailed once again in pre-European trade in Asia. EUR-USD flat-lined just below the 1.3400 level, and USD-JPY posted a 102.24-40 range. Cable firmed fractionally, but remained below Friday's 1.6734 peak. BoE boos Carney sounded hawkish remarks at the weekend, saying that the U.K. recovery is more than half way through and that he wouldn't wait to see real wages turn positive before hiking interest rates, though the Rightmove house price index came in below expectations at -2.9% m/m, which is the latest sign that the housing market is slowing following a surge over the last year.

    [EUR, USD]
    EUR-USD has been trading steadily in quiet summertime market conditions, having recovered to near net unchanged levels around 1.3390 after fractionally dipping to a 1.3381 low. The pair failed to sustain gains above 1.3400 on each of the last three days last week, which maintains a heavy technical feel to the euro, although a fairly extreme level of net euro shorts has at the same time been curtailing downside progress. A JPM research note sees the bias remaining to the downside for EUR-USD, which we concur with due to the Ukraine situation and the already evident impact that the trade sanctions on Russian is having on Germany. Resistance is marked at 1.3407-15, which encompasses the daily highs seen last Wednesday through to today. We continue to anticipate an eventual test of 1.3000 given the divergent paths of the ECB and the Fed and underlying economies.

    [USD, JPY]
    USD-JPY remains on a broadly bullish path. Bloomberg reported last week that the BoJ officials are considering cutting growth forecast for FY 2014, "according to people familiar with the central bank's discussions," and the JGB 10-year benchmark yield has dipped below 0.50% for the first time in 16 months. USD-JPY support is now marked at 102.17-20 and 102.00-10 (which encompasses the 100-day moving average). One uncertainty for a bearish yen view is the geopolitical situations in the Mideast and Ukraine, as any significant worsening would likely prompt yen gains.
    .

    [GBP, USD]
    The pound rallied on BoE's Carney remarks, which has seen Cable recover above 1.6700. Governor Carney said that the U.K. recovery is more than half way through and that he wouldn't wait to see real wages turn positive before hiking interest rates. News, meanwhile, that the Rightmove house price index came in below expectations at -2.9% m/m in August, which is the latest sign that the housing market is slowing following a surge over the last year, didn't have much impact. Cable now looks likely to extend higher, to the 1.6800 area, though the market may need to see signs that wages are increasing, which is a key metric that the BoE is monitoring with regard to the timing of rate hike, before becoming more bullish on sterling. Resistance is marked at 1.6766 (previous notable low).

    [USD, CHF]
    EUR-CHF remains heavy, pressing to a new five-month low below 1.2120 and last week piercing the former cycle low at 1.2104. We 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 below last week's low at 1.0903 and 1.0900, affirming an evolving bearish bias. The recent rally stalled shy of the 1.1000 level, painting a less bullish technical picture following a two-week up phase. Oscillations within 1.0900-1.1000 also appear 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 1.0865-1.0876.

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