FX Market Summary 04-22-2014: Breakout Attempts Flounder

Markets struggled to gain any momentum on Tuesday, unable to make the jump from low trading volumes seen during the Easter period. The dominance of narrow trading ranges also continued to sap trader confidence in attempting more aggressive strategies with moves quickly faltering.

The economic calendar was extremely sparse during the European session which discouraged any significant currency moves.  Comments from ECB member Coeure that there was scope for a further cut in interest rates failed to have any significant impact with markets waiting for comments from bank President Draghi later this week.

EUR/USD dipped to test support below 1.3800 and there was a brief dip towards 1.3780 which was met by solid demand and the pair moved back above the 1.3800 level. The Euro did find further support against the Swiss franc which allowed USD/CHF to maintain a solid tone above the 0.88 level.

The US existing home sales data was marginally stronger than expected at an annualised rate of 4.59mn for March from a revised 4.60mn previously. There was a solid 0.6% increase in monthly house prices while there was a stronger than expected reading for the Richmond Fed index which helped sustain confidence in the outlook and EUR/USD consolidated just above 1.3800. USD/JPY nudged higher following the releases while still being capped below 102.80 while AUD/USD retained positive momentum and pushed to the 0.9375 area as Wall Street opened with a firm tone.

The September Scottish referendum on independence from the UK could start to be a significant market focus with some concerns that uncertainty and a narrower opinion-poll lead for the pro-union side will start to undermine wider currency confidence. Sterling, however, held firm on Tuesday as GBP/USD probed resistance levels above 1.68. The currency’s trade-weighted index also increased to a four-year high as confidence held intact.

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