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By XE Market Analysis May 2, 2014 6:48 am
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    XE Market Analysis: North America - May 02, 2014

    The dollar was firmer as markets discount upside risk to today's payrolls report, with the whisper number pegging a 250k rise versus the median for 210k. EUR-USD fell to a 1.3852 low, breaching Thursday's low on route, though this is still barely more than 40 pips below yesterday's high. USD-JPY lifted above 102.50, returning the pair to the mid-way point of the range seen over the last two weeks. A batch of Japanese data today didn't have impact. AUD-USD breached Thursday's low at 0.9260, and the Aussie also softened against the euro and other currencies as recent declines in iron ore and copper prices due to falling demand out of China have returned market attention to the erosion in Australia's terms of trade theme. Cable took a 30-pip tumble to 1.6864 following a disappointing 60.8 outcome in U.K. construction PMI for April, dropping from 62.5 last and well off the median for 62.0.

    [EUR, USD]
    EUR-USD softened in early trade but quickly found a footing into 1.3850 as a stasis set in ahead of the U.S. jobs report. A slight revision higher in the Eurozone April PMI helped underpin the euro. We are expecting the U.S. employment headline to rise by 200k (median 210k). There is upside risk, on balance, following stronger producer sentiment employment components for the month, though the tick higher in claims data last week is an offset. The whisper number is 250k, so we'll need to see a decent outcome to avoid disappointment and a possible dollar sell-off. The EUR-USD rally yesterday stalled around 1.3890, shy of 1.3900 and the Apr-12 six-week peak at 1.3905, levels, along with the major-trend high at 1.3966, that form a key resistance zone.

    [USD, JPY]
    USD-JPY pulled its head back above 102.50. The pair has been trading on a 102 handle now for two weeks now. The pair is 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, 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. Fundamentals seem more bullish, however, as Fed and BoJ policy paths are likely to become more divergent..

    [GBP, USD]
    Cable took a 30-pip tumble to 1.6864 following a disappointing 60.8 outcome in U.K. construction PMI for April, which dropped from March's 62.5 and was well off the median for 62.0. The move put in a little distance from yesterday's major-trend peak of 1.6923, which was clocked in the wake of the stellar manufacturing PMI data. The sub-expectations mortgage lending numbers and a particularly disappointing business lending decline, along with the construction PMI today, has offset the manufacturing PMI, taking some of the wind out of sterling's sails. We continue to target 1.7000, however. At 60.8, the construction PMI continues to signal strong expansion in the sector, while services PMI next week should come in at a robust level. Support is marked at 1.6850.

    [USD, CHF]
    EUR-CHF has settled around 1.2200 again, having recovered from the one-month low of 1.2142 that was earlier in the month. The cycle low of 1.2104 and 1.2100 are considered key support levels. While situation in the Ukraine remains a concern, and a potential supportive factor for the CHF, the threat of SNB intervention into its 1.2000 limit peg is helping to deter franc buying. SNB's Jordan repeated last Friday that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD gave up the chase above 1.1000 and slipped to around 1.0950. There are reports that oil settlement inflows have underpinned the Canadian currency in a relatively illiquid market. There doesn't appear to have been a fundamental driver. The Arp-9 three-month low of 1.0858 now swings back into view. Bigger picture, USD-CAD has been in a consolidation phase since late January following a four-month rally period from sub-0.9700 levels. We'd need to see daily and weekly closes below 1.1000 to support the idea that a trend reversal is on the cards.

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