Home > XE Currency Blog > XE Market Analysis: North America - May 13, 2014

AD

XE Currency Blog

Topics1452 Posts1474
By XE Market Analysis May 13, 2014 7:00 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 1102
    XE Market Analysis: North America - May 13, 2014

    The USD remained on a genrally firm footing, led by EUR-USD, which dove to a new one-month low of 1.3711 in the wake of a much weaker than forecast German ZEW confidence reading. The ZEW came in at 33.1 in April, down sharply from 43.2 in March. USD-JPY edged out an 11-day high of 102.36. Cable tracked EUR-USD, making a trough of 1.6827, the lowest level since Apr-30, though sterling fared much better against the euro. AUD-USD drifted to the 0.9335-40 area, which is about 30 pips down on yesterday's London closing level.

    [EUR, USD]
    The EUR-USD market has turned sharply bearish, which had been in evidence by the lack of rebounds since the sharp ECB-induced loss of last Thursday-Friday before a fresh tumble today, toward the 1.3700 level. A UBS research note, for instance, argues EUR-USD will fall to sub-1.3400 levels over the coming four weeks, based on forecasts for May Eurozone CPI and the May U.S. payrolls report, along with ECB action at its June policy meeting (UBS anticipates that the depo, refi and marginal rates will all be trimmed by 15 bp, but also argues that a narrower easing would still be a euro-selling catalyst). Resistance is now marked at 1.3774-80 (which encompasses the Apr-30 low) and 1.3800-15. On the downside, the Apr-4 low at 1.3672 offers the next target. .

    [USD, JPY]
    USD-JPY edged out an 11-day high of 102.36. The pair 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]
    Cable tracked EUR-USD, making a trough of 1.6827, the lowest level since Apr-30, though sterling fared much better against the euro. EUR-GBP looks set to breach yesterday's 15-month low around just under 0.8150. The big focus for the pound will come on Wednesday with the labour market report covering March and April, and the publication of the BoE's quarterly Inflation Report. Sterling markets have discounted both strong data and an emergence of a hawkish tone at the BoE. We don't anticipate the current offered tone will persist today. Cable support is marked at 1.6822-32 (which encompasses the May-2 and May-8 lows), ahead of 1.6800.

    [USD, CHF]
    EUR-CHF is consolidating around 1.2200 after recovering from the mid-121s last week, 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 firmed back to around 1.0900 after running to a low of 1.0812 on Friday. The pair had been in a consolidation phase since late January following a four-month rally period from sub-0.9700 levels, with the bias having tilted to the downside. However, the still-dovish outlook for BoC policy seems to be putting a limit on the CAD's upside. We expect a choppy, sideways bias in USD-CAD.

    Paste link in email or IM