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By XE Market Analysis September 22, 2014 6:14 am
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    XE Market Analysis: North America - Sep 22, 2014

    The AUD and other dollar currencies came under pressures as the Bloomberg Commodity Index sank to fresh five-year lows. The U.S. dollar, meanwhile, was steady-to-softer against most other units outside the dollar bloc. EUR-USD firmed to an intraday high of 1.2867 during Asian trade, before settling around 1.2850 in Europe, about 20 pips on Friday's New York closing level. USD-JPY recovered the 109.00 handle in London trade after dipping under here in the Tokyo session. Last Friday's six-year peak at 109.46 remains in scope. The yen had firmed in Tokyo as the Nikkei and Asian stocks dipped, which is the usual inverse correlation for the Japanese currency. AUD-USD has extended further into six-month low territory below 0.8900.

    [EUR, USD]
    EUR-USD is modestly firmer on the day, in the mid-128s as of noon in Europe, though down on the Asia session high at 1.2867. The overall bear trend, which has been in place since the May high at 1.3993, has been losing some momentum after an accelerated period of losses from early September. Markets have to some extend priced in the divergence in ECB and Fed outlooks. That said, growth divergence between the Eurozone and U.S. should still keep the overall bias lower in EUR-USD. We are targeting the 2013 low at 1.2745. Initial resistance is marked at 1.2900, and key resistance is marked at 1.2995-1.3000.

    [USD, JPY]
    USD-JPY recovered the 109.00 handle in London trade after dipping under here in the Tokyo session. Last Friday's six-year peak at 109.46 remains in scope. The yen had firmed in Tokyo as the Nikkei and Asian stocks dipped, which is the usual inverse correlation for the Japanese currency. Last Friday's new low in the yen had come after Japan's Cabinet Office downgraded its economic assessment on the back of weak consumption, flat exports and weak industrial output. We remain yen bearish, looking for a test of 110.0.

    [GBP, USD]
    The pound has settled after a big event week. Scotland's "No" to independence vote avoided what would have been a chaotic break away from the United Kingdom. Markets are now re-focused on U.K. fundamentals, which is characterised by benign inflation and wage data that is leaving the BoE on an on-hold-for-now policy stance, which should keep Cable a sell-on-rallies. There is also be political fallout from the Scottish referendum, with more devolution to Scotland and constitutional changes to come. Cable support is at 1.6300 and 1.6284. Good selling interest would likely be seen into 1.6400.

    [USD, CHF]
    EUR-CHF has re-established itself below 1.2100 after dipping back below here last Thursday when the SNB maintained prevailing policy settings after its policy review, refraining from implementing negative interest rates. Swiss policymakers had been emphasizing recently that negative rates was an option, so the lack of the move prompted CHF short covering. Instead, the SNB left the three-month Libor target at 0.00-0.25% and maintained its commitment to the 1.2000 limit peg in EUR-CHF. This recent new major-trend low of 1.2044 remains in focus, though the speculative market will be wary of possible SNB intervention. The SNB will find defending the 1.2000 cap in EUR-CHF a tougher proposition in the context of broad, fundamentally-driven euro weakness than it would be in the case of specific franc outperformance.

    [USD, CAD]
    USD-CAD has recovered to the upper 1.0900-1.1000 area after the Fed raised its interest rate projection last week. Better Canadian manufacturing data helped the curtail the up-move last week, but continued oil price and broader commodity price declines should keep the pair underpinned. We target the March major-trend peak at 1.1278. Support is at 1.0886-1.0900.

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