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By XE Market Analysis May 8, 2015 5:40 am
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    XE Market Analysis: North America - May 08, 2015

    EUR-USD has been holding steady after earlier declining to a 1.1182 low, which was posted in early London trade. The euro has since settled in the low-to-mid 1.12s. The decline over the last day was pretty big, just over two big figures from the 10-week high that was made at 1.1392. The move had been driven dollar short covering ahead of the April payrolls report today. Elsewhere, USD-JPY has nudged back above 120.00. Sterling surged to a 10-week high at 1.552 on the surprising development of the Conservatives set to win the UK election with 325 seats, according to the latest BBC forecast at the time of writing, which is one short of an outright majority but easily sufficient to form a workable single-party government.

    [EUR, USD]
    EUR-USD has been holding steady after earlier declining to a 1.1182 low, which was posted in early London trade. The euro has since settled in the low-to-mid 1.12s. The decline over the last day was pretty big, just over two big figures from the 10-week high that was made at 1.1392. The move had been driven dollar short covering ahead of the April payrolls report today, though this has now petered out. The intraday low at 1.1182 and Wednesday's low at 1.1174 provides downside markers. We scope for a further retrenchment. We forecast April U.S. employment at +220k (median 225k) for the month, an improvement over the 126k March headline but still lower than the 264k headline in February. The unemployment rate should tick down to 5.4% from 5.5% in March. The data should help underpin the dollar's yield advantage over the euro following recent narrowing. It's also looking unlikely that we'll see any breakthrough in Greek bailout negotiations at Monday's Eurogroup meeting.

    [USD, JPY]
    USD-JPY has nudged back above 120.00 as the dollar trades firmer into the U.S. jobs report today, which is generally expected to show a rebound from the unexpected weakness that was seen in March. In the bigger picture, the pair continues to trend sideways, having orbited the 120.00 level since December. We expect an eventual breakout to the topside as the U.S. economy recovers traction following its Q1 soft patch. Near-term resistance is at 120.10, ahead of 120.54 (Tuesday's high), and support is at 119.70-71.

    [GBP, USD]
    Sterling surged to a 10-week high at 1.552 on the surprising development of the Conservatives set to win the UK election with 325 seats, according to the latest BBC forecast at the time of writing, which is one short of an outright majority but easily sufficient to form a workable single-party government. The left-wing SNP have won the Scottish vote by a landslide, winning 55 of 58 seats, which will given them mandate to put Scottish independence back on the agenda. For markets, brushing aside the Scottish issue, this is a good result, avoiding a hung parliament scenario and mandating the most pro-business party. While the Conservative's success will bring a referendum on EU membership in 2017, opinion polls suggest there is strong support for remaining within Europe.

    [USD, CHF]
    EUR-CHF has ebbed back under 1.0400 after making a one-month high at 1.0508 last week, as there remains little sings of breakthrough in Greek negotiations with its creditors. The SNB is amid an ongoing fight to curtail EUR-CHF's downside. The central bank last month expanded the number of groups subject to negative rates on deposits at the central bank in a fresh effort to curtail demand for the franc. The SNB said at its March policy review that the franc is "significantly overvalued," and would "remain active in the foreign exchange market, as necessary." SNB Chairman Jordan said more recently that "we will remain active in the foreign exchange market as necessary in order to influence monetary conditions."

    [USD, CAD]
    USD-CAD has settled to a consolidation around 1.2100 ahead of the U.S. and Canadian jobs reports, which we think will be net neutral for the pair. Big picture, the fall in USD-CAD from levels above 1.2700 during the mid-to-latter part of April is technically significant as it smashed the series of range lows established over the last four months in the 1.2351 to 1.2400 region. These levels now revert as strong resistance markers, and the overall bias is likely to remain lower. A big-picture support region at 1.1950-1.2000 remains in play, yet to be broken decisively.

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