XE Market Analysis: Europe - Jul 29, 2014 The dollar is moderately firmer across-the-board into the start of the two-day FOMC meeting, which is expected to see the Fed taper a further $10 bln off the QE purchase program. EUR-USD has dipped to the 1.3630 area while USD-JPY has risen above 101.95, though has so far remained shy of 102.00, where good Japanese exporter offers are reported. An MS research piece caught market attention, arguing that the BoJ could come under fresh pressure to implement further stimulus measures as the likelihood of achieving the 2.0% inflation target is declining. AUD-USD dipped back under 0.9400 after logging a 0.9415 high. A GS noted said that the strength of the Aussie will force an RBA interest rate cut, amid weak domestic growth and an expected fall in inflation, with the U.S. Feds efforts to curtail rate hike expectations making it harder for the RBA to cope with the AUD strength. Elsewhere, Cable dipped to a low of 1.6967, coming within six pips of Fridays low. The IMF said in an overall upbeat annual assessment of the U.K. economy that sterling has become overvalued. [EUR, USD] EUR-USD remains in a bear trend following eight lower lows over the last 10 trading days. Resistance is pegged at 1.3455-80, which encompasses a number of daily highs and lows from last week. Support is marked at 1.3421 (Fridays low) and 13400. We favour selling into EUR-GBPs recent gains given the contrasting policy stances of the ECB and BoE, targeting the July 2012 low at 0.7755. [USD, JPY] USD-JPY lift to around 101.95, though has remained shy of 102.00, where good Japanese exporter offers are reported. An MS research piece caught market attention today, arguing that the BoJ could come under fresh pressure to implement further stimulus measures as the likelihood of achieving the 2.0% inflation target is declining. USD-JPY pair has been trading on a 101 handle now for over two weeks. We favour the topside over the coming sessions. [GBP, USD] We remain bullish on sterling after the currency took a knock last week following the not-as-hawkish-as-expected BoE MPC minutes from the June policy meeting. We expect data this week (BoE lending and money supply data and the July releases of Gfk consumer confidence and the Markit manufacturing PMI survey) to collectively fit the pattern of robust recovery, which should help curtail the downside of both sterling and U.K. yields, which have been ebbing lower following last weeks not-as-hawkish-as-expected BoE MPC minutes from the June policy meeting. We favour selling into EUR-GBPs recent gains given the contrasting policy stances of the ECB and BoE, targeting the July 2012 low at 0.7755. Cable, meanwhile, has support at 1.6961 (Fridays low) and 1.6950. [USD, CHF] EUR-CHF remains entrenched near the 1.2150 mark. The situations in the Mideast and Ukraine are continuing to underpin the Swiss currencys safe-haven premium, though the cross has remained above the Jun-30 low at 1.2133, which was the lowest level seen in four months. Technically, the break of a former uptrend channel support line at 1.2190 opened the way to the mid-1.21s. The cycle low of 1.2104 and 1.2100 are key support levels. We would expect that the threat of SNB intervention into its 1.2000 peg to deter franc buying below 1.2100. SNBs Jordan repeated recently that the central bank remains committed to defending the currency cap. [USD, CAD] USD-CAD consolidates last Fridays rally above 1.0800, which was the first time above this level since Jun-20. The recent dip toward 1.0600 proved a step too far given the BoC outlook remains dovish. Support is now marked at 1.0800 and 1.7891 (50-day moving average). Resistance is at 1.8320 (200-day moving average)
Posted on: Tue, 29 Jul 2014 12:43:04 +0000
Trending Topics
Recently Viewed Topics
© 2015