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By XE Market Analysis July 29, 2013 10:16 am
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    XE Market Analysis: North America - Jul 29, 2013

    USD-JPY sank to a fresh one-month low after a risk-off seen in Asia, which supported the yen, while the high-beta Australian currency weakened. The MSCI Asia equity index posted over a 1.6% loss following weak data and corporate earnings leads, though European stocks managed to gain, aided by strong Italian business confidence, which following last week's strong Eurozone PMI data. The EUR was moderately higher against the USD, as of the late London AM session.

    [EUR, USD]
    EUR-USD was moderately higher in light early-week trade following a noteworthy sharp rise in Italian business confidence to 91.7 in July from an upwardly revised 90.5, which provides an encouraging sign of progress in one of the original "PIGS" economies. Broader USD softness is charactering trade in the European morning session. Resistance is marked by 1.3297 (last week's six-week peak) and 1.3300, which is a level that the whole interbank market seems to be focused on. The technical picture is bullish, with the present consolidation looking to be a pennant consolidation formation, signalling potential for a run toward 1.3400 and the June high of 1.3416. Central bank policy meetings from the U.S. and the ECB are due later this week. The ECB look less likely to ease after a pick up in Eurozone data signals, which has seen.

    [USD, JPY]
    USD-JPY sank to a fresh one-month after a risk-off seen in Asia where the MSCI Asia equity index posted over a 1% loss. Chinese Industrial profits came in at 6.3% y/y in June, slowing from +15.5% in May and feeding investor anxieties about Beijing's managed economic slowdown, while Japanese retail sales data disappointed expectations at +1.6% in June, offsetting news that Japan's PM Abe is reconsidering the planned sales tax rise, saying that the economy "is just starting to recover and now is the best chance for Japan to emerge from deflation. I don't want to lose this chance," though conceding that investors are "watching Japan's fiscal reform" efforts. USD-JPY posted its fourth consecutive lower low today in dipping to 97.64. A near-term daily trendline target is sitting at 97.40, while good resistance can be expected into 97.96-98.00. Notable exporter selling was reported today after an intraday bounced to the 98.20 area.

    [GBP, USD]
    Cable was higher on the day, reflecting broader USD softness, and sterling itself wasn't affect much by the weaker than expected mortgage approvals headline. EUR-GBP was near net unchanged at 0.8630 compared to levels just prior to the release of U.K. lending data, and the cross is presently consolidating in a bullish pennant-like formation, implying targets to 0.8680 area. The Jul-16 four-month peak is at 0.8711. Cable is also holding a bullish consolidation formation and last Friday's high at 1.5417 is the key near-term resistance level. We look for a break of this and a test of last Thursday's one-month peak at 1.5435. Support is pegged at 1.5355-65, a zone that encompasses recent lows and a trend support line. The BoE's Monetary Policy Meeting (Wednesday-Thursday) highlights a fairly busy week in the U.K. We expect the BoE will leave the repo rate and QE total unchanged but to announce a formal adoption of forward policy guidance. Remaining data this week includes the July Gfk consumer confidence and the July PMI surveys for the manufacturing and construction sectors, which we expect to collectively affirm economic recovery.

    [USD, CHF]
    USD-CHF has established a recovery phase following a two-week down trend, breaking a key technical resistance at 0.9308 and extending to the 0.9320 area. We're still in a bear trend, overall, but there is potential for a test of 0.9370, which marks the positive of the two-week trend resistance line. We would look for this to hold to confirm the bear trend. The 0.9320 now reverts to a support line, above the psychological 0.9300 level. EUR-CHF is showing a similar price action to the dollar pairing, with 1.2325 offering initial support and resistance expected in the 1.2350-55 area. The Swiss calendar this week highlighted by the KOF economic barometer, expected to improve to 1.21 (median same) after 1.16 in the previous month. This would signal improving economic momentum over the next six months. The SVME PMI survey for July is expected to show similar improvement, to 52.5 from 51.9. Although the fundamental outlook is improving we don't expect any softening in the SNB's commitment to maintain zero interest rates and its 1.20 limit cap in CHF versus EUR exchange rate.

    [USD, CAD]
    USD-CAD has entered a consolidation after a two-week bear trend, and the pair, like on Friday, has continued to hold above the 1.0250 support (a five-week low was marked last week at 1.0251). Offers are reported around 1.0300-10, with more noted at 1.0330-50. A bare Canadian data calendar will leave the focus on U.S. pending home sales data. May GDP data looms on Wednesday, competing for attention with the FOMC announcement.

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