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By XE Market Analysis March 20, 2017 7:23 am
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    XE Market Analysis: North America - Mar 20, 2017

    The USD index hit a fresh six-week low at 99.86, extending the run lower since last Wednesday's less hawkish than anticipated FOMC guidance. The index lifted off its lows, but at 100.01 was still down by over 1.6% since the Fed's announcement, as of the late London AM session. Downside momentum has been abating over the last two sessions, and the index is looking set for a consolidation phase. The U.S. calendar today is pretty quiet, though there is a slew of Fed speakers due today and during the week, which should at the least remind markets that another two rate hikes are in the works before the end of 2017.

    [EUR, USD]
    EUR-USD has held well bid, logging an intraday high at 1.0777 in the wake of German PPI data, which jumped to a rate of 3.1% y/y from 2.4%. Friday's six-week peak t 1.0782 is in the scopes. Friday's peak is at 1.0782, ahead of the February-2 high at 1.0828, which is the highest level seen since early December. We would look to fade EUR-USD gains from around 1.0800 with a slew of Fed speakers this week likely to maintain the momentum for at least two more rates by year-end.

    [USD, JPY]
    USD-JPY edged out a three-week low at 112.45, making this the fourth straight day of lower lows this pairing has seen. The pair since recouped to around 112.70. We maintain that the fundamental case for USD-JPY is bullish, with the BoJ's no change policy decision last week, accompanied by a pledge from governor Kuroda to maintain "powerful monetary easing," standing in stark contrast to the tightening course of the Fed, even if its communication wasn't as hawkish as markets had anticipated. We look for a rebound in USD-JPY, targeting 115.00. Support is at 112.16-20, ahead of 111.68-70.

    [GBP, USD]
    Sterling has been more than holding its own in recent sessions, benefiting from general dollar weakness and last Thursday's unexpected dissention in favour of hiking the repo rate by 25bp by MPC member Forbes at the BoE's March policy meeting, along with a hawkish twist on inflation risks in the minutes. Sterling has been quite volatile lately, making regular appearances both at the bottom and at the top of the day's winners and losers tables. More of the same looks likely going into the Brexit negotiation phase. Cable has logged a three-week peak today at 1.2436 having rallied from levels in the mid 1.22s. Support is at 1.2387-90.

    [USD, CHF]
    EUR-CHF has settled to an oscillation around 1.0700 after chopping amid euro volatility in recent sessions. The SNB left policy unchanged at its quarterly policy review last week, as expected, and repeated its boilerplate complaint that the franc remains "significantly overvalued," which was also to have been expected. EUR-CHF resistance is 1.0788-90, support at 1.0684-90.

    [USD, CAD]
    USD-CAD has consolidated its post-Fed losses after extending to a 16-day low at 1.3276 last Thursday, with the pair since settling in the 1.33s. We have been recommend buying into weakness given the recent break lower in oil prices and with the Fed only at the beginning of what is looking likely to be a protracted tightening cycle. We target December highs near 1.3600. Interim resistance is at 1.3420-25.

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