2013-03-28 11:16 (UTC)
XE Market Analysis
A fairly quiet session was seen during the European morning into the Easter break, with the dust settling after Wednesday's EUR sell-off amid the consequences of the Cyprus botched bailout and Italy's struggle to form a coherent government. EUR-USD recovered to the low 1.28s after closing in New York yesterday at 1.2780 bid. News that minor-league rating agency Egan-Jones had downgraded its rating of the U.K. to AA- from A+ (following up its downgrade of last July, when it removed its triple-A rating) had little impact on sterling, with Cable slightly firmer at near 1.5150 levels and EUR-GBP steady near 0.8450. The AUD underperformed, dragged lower by its umbilical link with China's stock market, which today dove over 2.5% both on Europe concerns but also as financial regulators tightened rules on wealth-management products.[EUR, USD]
EUR-USD consolidated slightly higher today after weak short positions squared out ahead of the Easter break, which will affect many global centres. Some chop was seen in Asia as selling interest appeared around 1.2790, but a subsequent recovery from sub-1.2780 levels brought 1.2800 back into play. A near-term technical rebound target is marked at 1.2827-30, while decent resistance can be expected into 1.2850-59 (the latter point marking the current situation of the 200-day moving average). Stops are reported above 1.2810.[USD, JPY]
The JPY held narrow ranges today. New BoJ Governor Kuroda testified in the upper house of the Japanese parliament, where he affirmed his dovish credentials, saying that he will deliver "so as not to betray market expectations." However, he also said that he bankroll government spending. On net his remarks had little market impact. The BoJ meeting next week, on April 3rd-4th, will be a big focus as its the first for the new governor mega-dove governor, expected to unleash a new wave of asset purchases -- in the amount of "whatever it takes" to cure Japan's deflation problem. Reports of repatriation flows to Japan, ahead of the fast approaching fiscal year-end (March 31st), had been widespread over the last week or two (and saw USD-JPY low three-week lows), but seem to have dried up now. It seems the market is now impatient for specifics from him regarding amounts of assets of asset purchases and the timing of them. Strong USD-JPY support can be expected in the 93.85-94.00 area.[GBP, USD]
GBP-USD drifted slightly higher, in sympathy with the EUR-USD move and other dollar pairings, meeting resistance into and around 1.5175. The Gfk consumer confidence figure, released overnight U.K. time, came in a fraction above expectations at -26 in March, unchanged from the previous month. News that that minor-league rating agency Egan-Jones had downgraded its rating of the U.K. to AA- from A+ (following up its downgrade of last July, when it removed its triple-A rating) had little impact on sterling. Offsetting the negatives was a strong service output figure for January, which improves the chances that we'll see a positive Q1 GDP outcome. Bigger picture, the pound looks to have entered a broad consolidation phase after hitting major trend lows toward 1.4800 earlier in the month. The BoE's recent verbal interventions and expectations for a gradual improvement in the U.K. economy through 2013 have settled bearish appetite. Good demand can be expected into 1.5000. EUR-GBP hit a six-week low today of 0.8416 and has broken below both the 20- and 50-day moving averages in recent sessions. Support is marked at 0.8400, while 0.8450 marks resistance.[USD, CHF]
USD-CHF consolidated lower, trading to a 0.9512 low after logging a two-week peak of 0.9553 yesterday. Good support is marked at 0.9500-05, with the 0.9500 level and its environs having proven to be a pivot level over the last month. We expect the pair to enter a broad consolidation in the coming weeks, during which period a further retreat seems likely, toward the 200-day moving average at 0.9416. EUR-CHF has continued to treade a steady path near 1.2200.[USD, CAD]
USD-CAD resistance is seen into the 1.0200 region, but stops will be a factor over 1.0220. USD-CAD took a moderate dive after the hotter Canadian CPI outcome on Wednesday, falling to 1.0150 from near 1.0180. The data changed the CAD tone for now, though dealers looked to Wall Street, where equities have stayed weak. Overall, softening risk taking levels put something of a floor under USD-CAD, which rebounded back over 1.0175 in afternoon trade.