FX Market Summary 04-07-2014: Euro Bounces From Support

USD/JPY found support close to the 103 level on Monday without being able to make any significant headway following the sharp losses on Friday. There was solid underlying dollar support on yield grounds while a firmer risk tone cubed any fresh advance for the Japanese currency as Asian equity markets held firm. 

The latest CFTC positioning data recorded a renewed increase in speculative yen shorts, illustrating the potential for a squeeze on positions even with medium-term negative yen sentiment and this continued to deter aggressive yen selling.

AUD/USD continued to hit tough resistance on any approach to the 0.93 level and dipped back towards 0.9250 support as a global index of freight rates continued to decline.

EUR/USD was initially confined to relatively narrow ranges with markets again struggling to find any traction on the Monday following Friday’s US payrolls data. On technical grounds, there was relief that the Euro held above the 1.3645 support area on Friday and bears also struggled to keep the rate below the 1.3690 area. The ability to find support triggered some recovery in the pair, but momentum was lacking with a lack of fresh incentives.

The economic data had a very limited impact with German industrial production registering a small 0.4% gain for February while the Sentix business confidence index edged marginally higher to 14.1 for March.

There was a flurry of comments from ECB officials which triggered some choppy trading later in the session. Mersch, for example, stated that there was a still along distance between the theoretical use of quantitative easing and actually putting plans into practice while Bundesbank head Weidmann stated that he had not changed his position on quantitative easing.

EUR/USD moved to highs just above the 1.3730 level following the comments and, although fellow ECB member Constancio stated that the bank was ready to act swiftly if inflation is too low, the dollar maintained a softer tone. EUR/USD was able to resist any fresh decline to below the 1.3700 area and pushed to highs near 1.3750 as USD/CHF dipped below the 0.89 level.

GBP/USD took some solace from the ability to hold 1.6550 support at the end of last week and edged higher to test resistance above 1.66 on wider dollar vulnerability.

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