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By XE Market Analysis February 16, 2018 2:22 pm
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    XE Market Analysis: Asia - Feb 16, 2018

    The dollar bounced modestly to end the week in N.Y. on Friday, with the move largely attributed to short covering into what will be a long U.S. weekend. The DXY advanced from three-plus year lows of 88.26 seen overnight, topping at 89.04 following strong housing starts data, and firmer import prices. EUR-USD opened over 1.2460, then fell to 1.2430 lows. USD-JPY was steady, peaking at 106.37. USD-CAD firmed to 1.2554 on soft Canada manufacturing data, and softer oil prices. Cable meanwhile, bottomed at 1.4005.

    [EUR, USD]
    EUR-USD pulled back from the three-plus year high of 1.2555 seen during the Asian session overnight, touching 1.2431 lows in N.Y. dealings, as profit taking sets in ahead of the long U.S. weekend. The pairing is expected to remain in buy the dip mode for the time being, as market concerns over the U.S. fiscal position, and trade protection are on the rise.

    [USD, JPY]
    USD-JPY recovered as much as 80 points from overnight, 18-month lows of 105.56, topping at 106.37. The Japan hours move lower came despite the re-appointment of Kuroda to another term as BoJ governor, and appointments of policy doves Wakatabe and Amamiya as deputy governors. Since then, short covering has been at play, as the market digests the likelihood that BoJ policy will remain ultra easy for the foreseeable future.

    [GBP, USD]
    Cable continued to spill lower in the wake of the UK retail sales miss. The pair has hit a bottom of 1.4005 in N.Y. hours. January UK retail sales came in at 0.1% m/m, well off the median forecast for a 0.6% m/m rise. On the Brexit front, meanwhile, the EU's chief negotiator Barnier clarified that the UK's red lines meant that a Swiss or Norway type model would be out of the question.

    [USD, CHF]
    EUR-CHF broke lower last week, leaving a four-month low at 1.1446. The cross has since settled in the lower 1.1500s. We expect directional bias to remain to the downside while the risk-off phase persists. The cross is seeing its biggest correction seen since the Swiss franc started to trend lower in mid last year, reflecting EUR-USD declines amid dollar outperformance and euro selling amid the ECB's evident disquiet about the extend of the euro's recent rally, which looks to have had a dampening impact on hawkish voices at the ctral bank. There is also some concern appearing in market research notes about the Italian election in early March, given the popularity of EU-sceptic Northern League.

    [USD, CAD]
    USD-CAD edged a little higher after the softer manufacturing data earlier, moving up from 1.2510. The pairing later peaked at 1.2554, and has since eased back to 1.2524 lows, as WTI crude prices perk up some. Activity wound down early, as both Canada and the U.S. prepared for a long weekend.

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