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By XE Market Analysis February 3, 2014 3:14 am
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    XE Market Analysis: Europe - Feb 03, 2014

    A six-month low in China official PMI helped to maintain a risk-off theme, though movement among the main currencies has mostly been fairly limited. A six-week low in EUR-CHF of 1.2210 was the most telling FX development as the safe haven Swiss franc rose. This came despite SNB-speak affirming that a removal of the 1.20 limit would only be considered if inflation was much higher. USD-JPY initially firmed, but came under pressure as the yen found support as the Nikkei built up a loss of 2%. The pair dipped to the 102.05-10 area from a peak of 102.41. EUR-USD lifted to a peak of 1.3492, which is fractionally higher than Friday's closing level in New York. AUD-USD dipped to a low of 0.8739 after making a peak above 0.8700 during the Sydney AM session. The weak China data weighted on the Aussie. A batch of Australian data came in mostly on the soft side of expectations, including the AIG manufacturing index (at 46.7), building approvals(-2.9% m/m versus the median for -0.5%) andANZ job ads (-0.3% m/m after +0.8% last).

    [EUR, USD]
    EUR-USD has been consolidating recent losses around 1.3450-1.3500. We saw last week close out under the 200-day moving average for the first time since last July, and this supports bearish technical arguments for further losses. Projections from an apparent two-month trendline imply a target of 1.3445-1.3450. Resistance comes in at 1.3500-1.3505 (which encompasses the 200-day moving average) and marks a previous pivot level.

    [USD, JPY]
    USD-JPY came under pressure as the yen found support as the Nikkei built up a loss of 2% on Monday. A six-month low in China official PMI helped to maintain a risk-off theme, which is a yen supportive backdrop. The pair dipped to the 102.05-10 area from a peak of 102.41. Projected trendline targets the 100.70 level. Trend resistance comes in at 102.40. Resistance can also be expected at 102.80-103.00.

    [GBP, USD]
    Cable's double rejection from forays above 1.6600 in late January has left a bearish tone in place, with the pair subsequently breaching both its 20- and 50-day moving averages. Big support can now be expected at 1.6395-1.6400, which marks former daily lows. A breach here would bring the Jan-6 low of 1.6337 and the mid-January low of 1.6307 into scope.

    [USD, CHF]
    EUR-CHF sank to a six-week low as risk aversion found fresh impetus from a six-month low in official China manufacturing PMI data. This came despite SNB-speak affirming that a removal of the 1.20 limit would only be considered if inflation was much higher. Key support is marked at 1.2200, ahead of the Dec-17 cycle low of 1.2167. We don't advise speculative accounts to hold long CHF exposures below 1.2100 given the threat of SNB intervention ahead of 1.2000.

    [USD, CAD]
    USD-CAD looks to be in the early stages of forming a topping formation. Last week's run to a five-week peak of 1.1224 came with declining bullish momentum, which is a sign that the underlying trend is weakening. Resistance is marked at 1.1175 and 1.1200, which would look to hold on a daily closing level basis to confirm potential of a topping formation in development. Key support is at 1.1000-1.1030, which encompasses as cluster of recent daily lows and highs.

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