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By XE Market Analysis July 10, 2019 7:06 am
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    XE Market Analysis: North America - Jul 10, 2019

    The USD has traded mixed into the New York interbank open and Fed Chair Powell's Congressional testimony. The U.S. currency posted moderate losses against the EUR and GBP, while still managing to claw out new highs versus the JPY, AUD and NZD. The EUR rallied on above-forecast production data out of France and Italy, which sparked a spike in Bund yields and saw EUR-USD post a two-day high at 1.1229. EUR-JPY printed an eight-day high at 122.32. GBP staged a rebound after a phase of underperformance, partly on the back a 0.3% rise in the rolling three month UK GDP figure for May, which surpassed the median forecast for a 0.1% gain, and offset marginally disappointing production data. Cable had been lifting ahead of the data releases, and then extended to a high at 1.2489, which is over 40 pips up on the low seen during the early London session. EUR-GBP tipped back under 0.9000 after earlier posting a six-month high at 0.9010. USD-JPY, meanwhile, edged out a new six-week high, at 108.99, concomitantly with intraday gains on Asia stock markets, before they turned modestly negative, which took the breeze out of the sails of Yen sellers. European shares and S&P 500 futures subsequently turned lower, too. The pair's range in Tokyo and the European AM remained less than 20 pips. The NZD took a sharp hit before rebounding, leaving a three-week low against the USD at 0.6568. There was no apparent news or data catalyst. AUD-USD whittled out a three-week low at 0.6918, aided lower by weak consumer sentiment data out of Australia.

    [EUR, USD]
    Interbank traders have been hitting the "buy euro" button following above-forecast production data out of France and Italy, which have sparked a spike in Bund yields. The common currency up-shifted by over 0.2% versus the USD and most other currencies, although a rebound in GBP (following a strong monthly GDP figure out of the UK) has seen EUR-GBP track moderately lower. EUR-USD punched a two-day high at 1.1226, putting a little space in from the three-week low seen yesterday at 1.1193. EUR-JPY printed an eight-day high at 122.32. Speculative accounts had been running a net short EUR position, so the data today provided a cue for spot traders to take a run at buy stops. Follow-through in EUR-USD will likely be curtailed with Fed Chair Powell's testimony before Congress looming.

    [USD, JPY]
    USD-JPY edged out a new six-week high, at 108.99, concomitantly with intraday gains on Asia stock markets, before they turned modestly negative, which took the breeze out of the sails of Yen sellers. European shares and S&P 500 futures subsequently turned lower, too. The pair's range in Tokyo and the European AM remained less than 20 pips. While USD-JPY declined in eight of the last 12 weeks, the last two have been up weeks and this week looks, so far, to made it a third. Support comes in at 108.45-48.

    [GBP, USD]
    GBP staged a rebound after a phase of underperformance, partly on the back a 0.3% rise in the rolling three month UK GDP figure for May, which surpassed the median forecast for a 0.1% gain, and which offset marginally disappointing production data. Cable had been lifting ahead of the data releases, and then extended to a high at 1.2489, which is over 40 pips up on the low seen during the early London session. EUR-GBP also tipped back under 0.9000 after earlier posting a six-month high at 0.9010. We wouldn't advise trend following GBP gains given the evident impact that prolonged Brexit uncertainty, and increased risk of a on-deal exit from the EU, have been wielding on the UK economy.

    [USD, CHF]
    EUR-CHF has put in a couple of weeks of steady, range-bound trading after dropping sharply in mid June as markets adjusted to increased prospects for the ECB to return to the dovish policy tap. The cross printed a two-year low at 1.1057 before recouping to levels around 1.1100. The advance of the Franc against the Euro will be displeasing to the SNB (the EUR-CHF cross being a good proxy on the Swiss currency's trade weighted value). The SNB restated at its quarterly policy review last month that downside risks to the economy have increased, and that the overall policy setting "remains as expansionary as before." The central bank also nudged its inflation forecast lower, now expecting CPI to average just 0.6% y/y this year, 0.7% in 2020, and 1.1% y/y in 2021. With the ECB increasingly under pressure to ease policy again, the SNB remains eager to counter Franc appreciation, especially against the Euro. Assuming the ECB remains on the path of further monetary policy easing, we would expect EUR-CHF retain a declining bias. The SNB's -0.75% deposit rate and threat of tactical intervention hasn't been sufficient to arrest recent appreciation of the Franc.

    [USD, CAD]
    USD-CAD has settled around the 1.3130-35 mark after putting in two consecutive days of gains, which yesterday left a nine-day high at 1.3141. This extends the recovery from last Friday. Bigger picture, the pair has been in a distinct bear trend since late May, declining in four of the last five weeks. Trend resistance comes in at 1.3091-94.

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