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By XE Market Analysis January 24, 2014 2:06 pm
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    XE Market Analysis: Asia - Jan 24, 2014

    There was no U.S. data on Friday, and the FX market generally relied on equity and Treasury market moves for direction. The steep Wall Street sell-off, combined with lower yields resulted in a mostly mixed dollar. USD-JPY stayed down near 102.20, though while EUR-USD was kept under London highs, it remained supported over 1.3660. USD-CAD stayed under 1.1100, as slightly firmer y/y Canadian inflation data supported the CAD to a degree. Cable meanwhile, traded under 1.6480 in the aftermath of dovish BoEspeak. Concerns over EM growth remained high, with China growth worries simmering, and currencies in Argentina and Turkey in particular, taking a beating.

    [EUR, USD]
    EUR-USD spiked through 1.3700 to a three-week peak of 1.3739 into the N.Y. open, as the USD continued to take it on the chin amid the broader risk-off theme in global markets, itself driven by an emerging market cascade following weak China flash PMI. The pairing eased back in early N.Y. trade, though continued to find support above 1.3670.

    [USD, JPY]
    USD-JPY dipped under 102.20, after bouncing from the 102.00 level in London, to over 102.70. Eroding risk taking levels, and softer U.S. yields took their toll on the pairing, though there was talk of semi-official bidding interest into the 102.00 mark. More stops are likely below the figure, though the dollar managed to hold above the level into the close.

    [GBP, USD]
    Cable traded under 1.6480 in the aftermath of dovish BoEspeak, after touching highs near 1.6670 in London. The sharp turnaround was indicative of longs being well over-extended, and the severe shake-out may give sterling bulls some pause for the near term at least.

    [USD, CHF]
    The meltdown in risk taking appetite has seen the CHF rally sharply this week, as China and EM concerns grip the markets. Safe-haven flows will likely continue to buoy the CHF until things settle down a bit. The FX market will be wary pushing EUR-CHF too far under 1.2200 however, as sustained downward movement will likely illicit a response from the SNB.

    [USD, CAD]
    USD-CAD losses mounted in London trade, with sell stops hit on the move under 1.1090, which was the most recent low. The pairing dipped briefly under 1.1055, though looked heavy on moves into 1.1100. Given the sharp gains seen this week, pre-weekend profit taking wasn't too much of a surprise, though following a period of consolidation, further gains could be in the cards. The risk outlook has shifted negatively some this week, which if ongoing could continue to weigh on the CAD, along with the BoC's more dovish shift this week.

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