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By XE Market Analysis July 3, 2014 6:55 am
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    XE Market Analysis: North America - Jul 03, 2014

    EUR-USD was little affected by Eurozone services data, which came in mixed at the national level and produced an unchanged 52.8 readings for both the final June pan-Eurozone services and composite readings. The euro has remained within a narrow ranged centred on 1.3655-60 with markets now look to the June ECB announcement and the U.S. June payrolls report. Sterling recovered after taking a knock on a sub-forecast services PMI out of the U.K., which came in at 57.7 in June after 58.6 in May. Cable dipped to a 1.7133 low after about a 25 pip decline, before recovering. At 57.7, the survey still signals robust growth in the sector. The AUD took a tumble after RBA Governor Stevens said that investors are underestimating the risk of a sharp fall in Australian currency, which is overvalued by more than "a few cents." USD-JPY drifted to a nine-day high of 101.94 amid continued reports of yield-seeking investment flow out of Japan.

    [EUR, USD]
    EUR-USD was little affected by Eurozone services data, which came in mixed at the national level and produced an unchanged 52.8 readings for both the final June pan-Eurozone services and composite readings. The euro has remained within a narrow ranged centred on 1.3655-60. The 1.3640 level remains the key near-term support, which marks both yesterday's and Monday's low. A cluster of sell-stop orders are reportedly sitting under 1.3635-30, while the technically minded will be looking for a sub-1.3640 close today to help confirm that Monday's move above of the 200-day moving average, presently at 1.3677, was false break. Markets now look to the June ECB announcement and the U.S. June payrolls report. EUR-USD resistance is at the aforementioned 1.3677 level, ahead of 1.3698-3700 (Monday's high), and 1.3723 (the May-21 high).

    [USD, JPY]
    USD-JPY drifted to a nine-day high of 101.94 amid continued reports of yield-seeking investment flow out of Japan. Bigger picture, USD-JPY remains entrenched 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 yet, 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]
    We remain sterling bullish with the BoE having left the hawkish starting gates ahead of the Fed and ECB. The BoE's stance has been backed-up by a solid PMI report for June. Although the composite PMI ebbed to a three-month low of 58.4 from 59.1 in May, this is also still a high level, consistent with Q2 GDP growth of 0.8% q/q. BoE's Bean said over the weekend that market expectations of a rise in interest rates at the turn of the year are "reasonable." A big-picture Fibonacci retracement level at 1.7330, which is a 50% retracement level of the 2007 to 2009 decline, provides bulls with a target. Our EUR-GBP target is provided by the major trend lows of July 2012 at 0.7755.

    [USD, CHF]
    EUR-CHF breached 1.2150 this week and extended to a 1.2133 three-and-a-half month low, as the situations in Iraq and Ukraine continues to underpin the Swiss currency's safe-haven premium. Technically, the break of a former uptrend channel support line at 1.2190 opened the way to the mid-1.21s. The cycle low of 1.2104 and 1.2100 are key support levels, so far remaining unchallenged. 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 found a toehold after logging a fresh six-month low at 1.0628 on Wednesday, which was the sixth consecutive lower low on the daily chart. The pair breached below the 200-day moving average at 1.0783 last week and has been trending lower since. The move reflects a broad dollar-bloc bid that was initially sparked by much stronger than expected PMI data out of China and Japan, which has underpinned the commodity-correlating currencies as investors adjust a more optimistic world outlook. The BoC is also under pressure to reconsider its dovish policy stance. Resistance is pegged at 1.6996 (Friday's high) and 1.0700. Former congestion around 1.0580-1.0600 is support.

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