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By XE Market Analysis May 27, 2015 7:10 am
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    XE Market Analysis: North America - May 27, 2015

    EUR-USD settled around 1.0900 after an early London run higher stalled at 1.0919, which seems to be tell-tale price action of bearish market sentiment. Yesterday's low at 1.0863 remains in scope. EU's Junker suggested Greece may be given more time, but, of course, time is not the problem, rather the seemingly intractable differences between Athens and Greece's creditors is. USD-JPY rallied to a fresh eight-year peak of 123.77 during the London AM session on the nominal price chart. The move reflected fresh dollar strength and came despite BoJ deputy governor Iwata saying today that he sees no need for further easing. Despite policymaker talk of no more stimulus, the ultra loose monetary policies of Abecomics are still likely to be remaining in force when the Fed eventually does reach rate hike lift-off, and this should maintain an upside bias in USD-JPY.

    [EUR, USD]
    EUR-USD settled around 1.0900 after an early London run higher stalled at 1.0919, which seems to be tell-tale price action of bearish market sentiment. Yesterday's low at 1.0863 remains in scope. EU's Junker suggested Greece may be given more time, but, of course, time is not the problem, rather the seemingly intractable differences between Athens and Greece's creditors is. The pair has fallen some 4% in seven of the last eight trading days after making a three-month peak 1.1486 on May-15. The continued lack of substantive progress in Greece's bailout negotiations with its creditors looks likely to remain a drag on the euro, while Eurozone May confidence data due tomorrow should paint a similar picture to the sub-expectations May ZEW and PMI surveys of last week. The dollar, meanwhile, has been benefiting from the rekindled Fed tightening narrative. EUR-USD support is marked at 1.0860-65, and resistance at 1.0960 (50-day moving average).

    [USD, JPY]
    USD-JPY rallied to a fresh eight-year peak of 123.77 during the London AM session on the nominal price chart. The move reflected fresh dollar strength and came despite BoJ deputy governor Iwata saying today that he sees no need for further easing. Iwata also said that the economy is on a gradual recovery path and that recent strong gains in Japanese stocks reflect record corporate profits Despite policymaker talk of no more stimulus, the ultra loose monetary policies of Abecomics are still likely to be remaining in force when the Fed eventually does reach rate hike lift-off, and this should maintain an upside bias in USD-JPY.

    [GBP, USD]
    Sterling continues to trade on a mixed footing, today reversing the recent pattern in advancing against the softer dollar while slipping versus the euro. The UK PM has commenced EU reform talks at the leaders summit in Riga last week just as the debate in the UK about EU membership, ahead of a pledged in-out referendum by 2017, kicks off in earnest. Airbus and Deutsche Bank waded in with threats to shift out a big chunk of their UK operations if the nation decided to quit the European Union. This background creates uncertainty for long-term investors, although the prevailing good fundamentals of the economy should prove an offsetting tonic, for now, given that there is reasonable ground to believe that the UK will eventually vote to remain in the EU. Cable is entrenched below 1.5400 following a dive from the post-election peak of 1.5815.

    [USD, CHF]
    EUR-CHF is back below 1.0400 level as the euro trades broadly lower. SNB's Zurbrugg said last week that negative rates in force for as long as policy requires. This is the new boilerplate rhetoric of Swiss policymakers, who are in persisting fight to curtail EUR-CHF's downside, though their options will be limited in context of broad euro underperformance. 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 last policy review in March that the franc is "significantly overvalued," and would "remain active in the foreign exchange market, as necessary."

    [USD, CAD]
    USD-CAD's rebound from sub-1.2000 levels extended to the 1.23 area. USD-CAD left a four-month low at 1.1920 on May-14, but we didn't see a convincing break of the big-picture support region at 1.1950-1.2000. Bigger 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 now mark resistance.

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