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By XE Market Analysis February 6, 2015 3:31 pm
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    XE Market Analysis: Asia - Feb 06, 2015

    The dollar rallied sharply and broadly after the much better U.S. January employment report, though the bulk of the trading action was over within an hour of the data. EUR-USD initially dropped to 1.1350 from 1.1455, rallied back to 1.390, then drifted off to session lows of 1.1312. USD-JPY meanwhile, rocketed to 118.35 from 117.20, and spent the remainder of the session moving to 119.22 highs. Cable ended up at 1.5211 lows, down from 1.5340, while USD-CAD was whipsawed by a better Canadian jobs report, initially dropping to 1.2375 from 1.2445, before being dragged to 1.2546 highs by the broadly stronger greenback. Treasury yields shot up, and stayed up, perhaps as the market comes to consensus on a mid-year Fed hike. Equities rallied initially, though rate hike fears tempered sentiment, with major indices giving back their gains into the close.

    [EUR, USD]
    EUR-USD bounced to 1.1390 from 1.1350, after tumbling over 100 points in the immediate aftermath of the U.S. jobs report release. From there, the euro continued its way lower, although at a leisurely pace, eventually touching 1.1312. The pairing had struggled to hold on to gains near or over 1.1500 since Tuesday, and a break under 1.1300 could open the floodgates to the downside once again. Greece remains a thorn in the euro's side, with the ultimate solution to the crisis anyone's guess at this juncture. We continue to see scope for further euro losses in the coming days and weeks, as the back-and-forth between the EU and Greece is dragged into the headlines, and as QE kicks off in earnest. Greece's credit rating was lowered one notch to B- by Standard and Poor's, from B previously, though this was widely expected, and there was no FX reaction.

    [USD, JPY]
    USD-JPY spiked up over 100 points to 118.34 from 117.25 immediately following the U.S. jobs report. The pairing then quickly vaulted over its recent 118.86 high, on its way to 119.22 peak, levels last seen on January 12, where the pairing touched 119.32. This level will be the next upside target. USD-JPY continued to be supported by the big jump in U.S. yields, and positive equity market backdrop. With rising consensus for a June Fed hike, the dollar may find further support.

    [GBP, USD]
    Cable established a foothold above 1.53 in London after making a one-month peak at 1.5343. EUR-GBP has also remained below 0.75. The outperformance in sterling came after solid UK data this week, though was trumped Friday by the strong U.S. jobs report. Cable fell to 1.5260 lows after the data, and continued to 1.5112 lows, as the dollar advanced broadly.

    [USD, CHF]
    EUR-CHF rallied over 1.5% on reported SNB intervention during the European AM, which sent the cross back over 1.0600 after opening in Europe just below the 1.0500 handle. This fits the story reported by an "informed source" of the Tages Anzeiger newspaper earlier in the week, who said that the SNB is initiating a "soft floor" in EUR-CHF at 1.05-1.10. SNB's vice-chairman Danthine last week that the SNB was still "fundamentally prepared to intervene in the foreign exchange market," and that Singapore's SGD basket policy "deserved closer examination." He had also said that the franc was still overvalued, but didn't mention what would be an appropriate level.

    [USD, CAD]
    USD-CAD initially fell following the solid jobs reports from both sides of the border, falling to 1.2377 from 1.2430, before being dragged up to 1.2500, as the greenback in general ramped higher. The pairing settled in near 1.2430, though slowly made its way to 1.2545 highs, as gold prices tumbled, oil came off its high, and U.S./Canada yields differentials moved more in the USD's favor. WTI crude moved briefly over $53, though settled lower near $51.50.

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