Home > XE Currency Blog > XE Market Analysis: Asia - Jan 20, 2014

AD

XE Currency Blog

Topics1367 Posts1387
By XE Market Analysis January 20, 2014 2:32 pm
    XE Market Analysis's picture
    XE Market Analysis Posts: 1035
    XE Market Analysis: Asia - Jan 20, 2014

    EUR-USD recovered from the an eight-week of 1.3507 seen during the Asia session on Monday, triggering buy stops through 1.3540-50 and making an intraday peak of 1.3566. The speculative market had built up net short exposure (indicated by ONDA analytics at about 60% short versus 40% long), so a rebound in Monday's subdued market seemed natural enough. Underlying fundamentals remain bearish with the ECB making an concerted effort to decouple Eurozone yields from U.S. yields as the Eurozone central bank tackles a disinflation problem. USD-JPY oscillated around the 104.00 level. EUR-JPY and other yen crosses saw pretty much the exact same price action. AUD-USD rebounded above 0.8800 after making a two-and-a-half year low of 0.8756 during the Sydney session on Monday.

    [EUR, USD]
    EUR-USD recovered from the an eight-week of 1.3507 seen during the Asia session on Monday, triggering buy stops through 1.3540-50 and making an intraday peak of 1.3566. The speculative market had built up net short exposure (indicated by ONDA analytics at about 60% short versus 40% long), so a rebound in Monday's subdued market seemed natural enough. Underlying fundamentals remain bearish with the ECB making an concerted effort to decouple Eurozone yields from U.S. yields as the Eurozone central bank tackles a disinflation problem.

    [USD, JPY]
    USD-JPY oscillated around the 104.00 level. EUR-JPY and other yen crosses saw pretty much the exact same price action. We continue to expect that USD-JPY's major-trend peak at 105.44 to fall as the BoJ's expansive monetary policy should continue to drive the yen to fresh lows during 2014. Data this month showed Japan's monetary base surged 46.6% y/y in December to a record Y193.5 tln, illustrating the impact that the BoJ's reflationary policy is having. The BoJ is targeting a monetary base to Y270 tln by the end of the year.

    [GBP, USD]
    Sterling received a short in the arm following last Friday's release of much stronger than expected retail sales data for December. However, the overall outlook is still looking generally less bullish following CPI figures that showed inflationary pressures to be rapidly unwinding and real sector data and survey evidence that have shown that the economy hasn't been sustaining recovery momentum as well has had been thought. The data backdrop supports the BoE's ultra-easy policy stance. We still expect the pound to hold up against the likes of the yen, but to loose ground to the dollar. GBP-USD's six-month rally now looks to have capped out and we see scope for a correction to 1.6000. Initial resistance is marked at 1.6450.

    [USD, CHF]
    EUR-CHF has consolidated gains above 1.2300 after recovering from the Dec-17 low of 1.2166. Price action has been pretty choppy over the last couple of weeks, but overall we expect the currency to remain on a bigger-picture softer footing as a consequence of the unwinding in the Swiss currency's safe haven premium as the period of Fed policy uncertainty ended with its decision to commence QE tapering. Resistance comes in at 1.2400, support at 1.2320 and 1.2300.

    [USD, CAD]
    USD-CAD has been consolidating around 1.0950. Bigger picture, the pair has broken sharply higher over the couple of weeks, mostly driven by weaker Canadian data and the consequent underpinning of a favourable U.S. versus Canadian yield differential movement. The pair punched through the 1.0700-1.0900 region, taking out its Dec-20 major trend peak of 1.7337 on route. Market commentaries seem to be highlighting the 1.1000 as a key resistance point, a break of which would bring the August 2009 high of 1.1125 into scope. Support is pegged at 1.0920-1.0900. Wednesday's BoC monetary policy meeting and MPR is the next key event, though the FX market has likely factored in the possibility of the BoE adopting an easing bias.

    Paste link in email or IM