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By XE Market Analysis January 13, 2015 2:53 pm
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    XE Market Analysis: Asia - Jan 13, 2015

    Crude oil's move to trend lows of $44.19 threatened to wash out equity market gains into the N.Y. session on Tuesday. It was not to be however, as a rebound in crude back over $46, resulted in a sharp Wall Street rally in morning dealings. The dollar was mixed however, as EUR-USD matched last week's trend low of 1.1754 before moving back into 1.1800, while USD-JPY could not match overnight highs of 118.85, and later slipped under 118.00. USD-CAD came up just short of the key 1.2000 level, though fell back as oil prices moved higher. Cable reclaimed the 1.51 handle into the open, before rallying toward 1.5190 highs. There was no data to drive the markets on Tuesday, though Wednesday's U.S. calendar will bring retail sales, import/export prices, and weekly petroleum inventory data.

    [EUR, USD]
    EUR-USD flirted with last week's Friday low of 1.1763, and Thursday's trend low of 1.1754, with the pairing remaining heavy following ECB's Coere saying earlier that the central bank is ready to decide on bond purchases at the Jan-22 council meeting, and his colleague Nowotny saying that the ECB should act sooner rather than later on the deflation risk. In addition, a better risk backdrop helped the USD more generally, with Wall Street opening higher. EUR-USD sell stops can be anticipated under the 1.1750 level, with the December, 2005 low of 1.1661 the next major downside target. The pairing later matched its trend low of 1.1754, where a modest round of short covering was noted. The bounce took the euro to 1.1799 highs, before fading under 1.1780 again.

    [USD, JPY]
    USD-JPY approached its overnight highs of 118.85 after the Wall Street open, peaking at 118.77, as stocks moved sharply higher, along with a pop in U.S. yields. Weaker oil prices have dented Japan's inflation outlook, with Reuters reporting overnight Japan's Economics Minister downgrading 2015 inflation to 1.4%, from the 2.0% BoJ target. This should keep hopes alive for further stimulus, which should continue to weigh on the yen. For the Tuesday session however, USD-JPY fell back into the London close, basing under 118 before stabilizing just over the figure.

    [GBP, USD]
    Cable rebounded sharply on BoE-speak with Governor Carney saying that he still expects interest rates to rise in the foreseeable future despite the UK CPI diving to a joint-record low of 0.5% y/y in December, in data released today. There is also market conjecture downplaying the drop in headline inflation as core CPI in fact ticked higher, to 1.3% y/y from 1.2% in November. The pound retained its gains through the N.Y. session, peaking at 1.5189 ino the London close.

    [USD, CHF]
    EUR-CHF has come under fresh pressure in recent days, once again amid general euro weakness, and has logged a low of 1.2007 today. Swiss foreign currency reserves data for December, out today, show reserves rose to CHF 495.1 bln (a record) from CHF 462.7 bln in November, confirming the SNB's intervention on Dec-18. The intervention was additional to the implementation of a negative deposit rate, which was cut to -0.25%, also on Dec-18. The rouble crisis and euro weakness saw EUR-CHF come under pressure in December, and on Dec-16 the cross came within six pips of SNB's the 1.2000 limit. The cross spiked to 1.2096 on Dec-18 on the intervention and the announcement of the negative deposit rate. This was the first time that the SNB has intervened in spot since 2012. With the ECB set to pursue QE, the SNB will have its work cut out to defend 1.2000 during the first half of 2015.

    [USD, CAD]
    USD-CAD stopped just shy of the key 1.2000 mark, peaking at 1.1993 before easing back under 1.1965. The ongoing oil price collapse of course, has been the major driver of CAD weakness, and with crude prices showing no signs of any kind of enduring rebound, it seems inevitable that USD-CAD will continue its march higher. The pairing got a reprieve later however, as oil market shory covering allowed USD-CAD to fall back into 1.1925. On the upside, barrier option defense is rumored into the 1.2000 mark, though fresh buyers are expected on a break over the figure, with the next major upside target coming in at 1.2130, marking the February, 2009 low. Initial support is seen into 1.1900-1.1880.

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