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By XE Market Analysis February 12, 2015 2:11 pm
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    XE Market Analysis: Asia - Feb 12, 2015

    The dollar had another rough outing on Thursday, losing ground across the board. The selling kicked off after a higher than expected weekly jobless claims report, and much softer January retail sales data. From session lows, EUR-USD gained nearly 100 points to touch 1.1423, while USD-JPY slid from over 119.80 to 118.51. USD-CAD slumped on firmer oil prices, as cable ran up to 2015 highs of 1.5392. Yields came off their recent highs, as Wall Street advanced, with sentiment buoyed by the reported Ukraine cease-fire.

    [EUR, USD]
    EUR-USD made a one-week high of 1.1401 at mid-morning, as the Ukraine/Russia cease-fire provided the bulk of support. The latest move saw some stale shorts squeezed out, as up until today, narrow ranges centered on 1.1300 had been the rule. Based on past history, it remains to be seen how successful the cease-fire will be, while the outcome of the Greek crisis remains anyone's guess. As a result, we expect today's euro updraft will provide better levels to sell into. EUR-USD later touched 1.1423. Fund selling was noted into the highs, reportedly as core short positions were added to. Aside from intra day plays, there was little talk that today's rally was the result of new long positions being built. Depending on how the Greek story unfolds, with more information likely on Monday, and the tentative cease-fire in Ukraine, EUR-USD could quickly be back on the 1.11 handle next week.

    [USD, JPY]
    USD-JPY reacted to the weaker U.S. sales and claims data with more force than other dollar pairings, dropping initially into 119.20 from 119.70. The pairing steadied ahead of 119.00, before later falling to 118.51 lows. Softer U.S. yields didn't help, though the improved risk backdrop offset some, allowing USD-JPY to trade back up to 119.00 into the close. Market participants will be looking for BoJ clarification in the days ahead, following overnight reports that some in the BoJ think further QE may be counterproductive, and we can expect choppy price action in the interim.

    [GBP, USD]
    Cable broke above its 50-day moving average at 1.5346 and the Feb-5 peak at 1.5352 on route to the high-so-far of 1.5388. This is the first time Cable has traded above the 50-day average since Jul-29 last year, suggesting that the bear tend from the Jul-14 high at 1.7192 to the Jan-22 low at 1.4951 has come to an end. Key resistance is pegged at 1.5486-15507, which encompasses a series of previous daily lows.

    [USD, CHF]
    EUR-CHF recovered over 1.0600 area from sub-1.05 levels on news of the agreement on Ukraine, which has been supportive of the euro. This extends the recovery the cross has seen since trading as a low at 1.0414 earlier in the week, which was seen during a bout general euro weakness. SNB's Jordan reaffirmed this week that the central bank is prepared to intervene in EUR-CHF if necessary, that, "We are observing the exchange rate situation as a whole ... If necessary we are active," but, " ... we do not speak about our transactions." He said that the franc remains "clearly overvalued" at around 1.0500, but said refrained to comment on what it considers the preferred franc levels or what it sees as a fair value. An "informed source" of the Tages Anzeiger newspaper last week said that the SNB is initiating a "soft floor" in EUR-CHF at 1.05-1.10.

    [USD, CAD]
    USD-CAD reversed the prior session's gains overnight, falling under 1.2550 into the open, after peaking just under 1.2700 on Wednesday. The rebound in oil prices was the main driver, which was accompanied by a generally softer USD. The pairing touched 1.2526 intra day lows after the weaker U.S. data. Option related buying interest was reportedly parked into 1.2500, though the pairing later blew through the figure, touching 1.2438 lows, as WTI crude rocketed to $51.38 highs, up nearly $2 from opening levels. Adding to the pressure, was risk-on throughout the markets, and a broadly lower greenback.

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