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By XE Market Analysis May 8, 2014 6:55 am
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    XE Market Analysis: North America - May 08, 2014

    The dollar traded softer versus the EUR and AUD, but held steady against most of the other main currencies. The euro held firm into the ECB announcement and press conference with the market discounting a no-change outcome. EUR-USD rose to a peak of 1.3949 after earlier testing 1.3905, which is a former intraday high and now support level. The AUD, meanwhile, rallied following stronger than expected Australian employment data, which rose 14.2k in April, and was also encouraged by above-forecast trade surplus out of China, which helped feed a risk positive session in the Asia Pacific. AUD-USD clocked a new high of 0.9394, which is the loftiest the Aussie has been in just over three weeks. The jobs report vindicated RBA's decision to stick with its neutral bias this week after announcing unchanged monetary policy. Elsewhere, USD-JPY was steady, etching out a peak of 101.95 during the Tokyo session as stocks there rallied, subsequently settling around 101.70-80. Cable recovered to the 1.6965-70 area from a brief dip under 1.6950.

    [EUR, USD]
    EUR-USD slightly firmer ahead of the ECB announcement and press conference. The market should have discounted the view that the central bank will refrain from taking any easing measures today, and there may be a risk of an on-the-fact drop in the euro, especially if we get some dovish sound bites from Draghi. Reuters cite market sources reporting that there is strong selling interest in to the 1.4000 level, above March's 1.3966 major-trend peak. Yesterday's peak at 1.3938 is an interim resistance level. The earlier low of 1.3905, which is a former daily high, is a key near-term support level.

    [USD, JPY]
    USD-JPY has oscillated in the high 101s, ebbing to a 101.70 low after making a 101.95 peak. A pick-up in risk appetite in Asia following good China trade data helped curtail the yen's recent bid, although with the BoJ minutes to the early April meeting having signalled that the central bank doesn't see that an expansion in its already aggressive policy would be necessary, the yen may find a generally firmer footing. 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, 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]
    Sterling should remain underpinned into next Wednesday's BoE Inflation Report, which should bring upward revision to inflation and growth projections and generally present a less dovish, more hawkish tone following a run of strong data out of the U.K.. EUR-GBP logged a two-month low on Wednesday, at 0.8208, while Cable has consolidated in the upper 1.69s, looking set made a break above 1.7000. The 1.7000 is a big psychological level and is reported a big option barrier level. Today's BoE announcement should prove to be a non-event for markets as no change and no statement are widely expected.

    [USD, CHF]
    EUR-CHF has consolidated the gains posted yesterday to the high 1.21s, which reflected a correction in the Swiss franc's safe haven premium following Putin's mollifying words of diplomacy with regard to Ukraine. The cycle low of 1.2104 and 1.2100 are key support levels. The threat of SNB intervention into its 1.2000 limit peg is helping to deter franc buying to some extent. SNB's Jordan repeated recently that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD extended lower yesterday, below 1.0900 after giving up the chase above 1.1000 last week. The Arp-9 three-month low of 1.0858 is now back in 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. The bias has tilted to the downside, toward 1.0700.

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