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By XE Market Analysis February 9, 2015 3:05 am
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    XE Market Analysis: Europe - Feb 09, 2015

    UR-USD clocked a one-week low at 1.1295 in early Asia-Pacific trade on Monday before settling to narrow trading in the low 1.13s. The new low reflected general dollar firmness following the strong U.S. jobs report on Friday. USD-JPY has consolidated around 119.0 after logging a four-week peak at 119.22 on Friday. Cable is entrenched in the mid-to-low 1.52s following Friday's dollar rally, though sterling is faring better against the euro, with EUR-GBP looking set for a test of the Jan-26 low at 0.7406. EUR-CHF is trading lower, back near 1.05 amid a generally softer euro. SNB's Jordan said over the weekend that the central bank is prepared to intervene in EUR-CHF if necessary, that, "We are observing the exchange rate situation as a whole ... If necessary we are active," but, " ... we do not speak about our transactions."

    [EUR, USD]
    EUR-USD clocked a one-week low at 1.1295 in early Asia-Pacific trade on Monday before settling to narrow trading in the low 1.13s. The new low reflected general dollar firmness following the strong U.S. jobs report on Friday. The 11-year low at 1.1098, seen on Jan-26, offers a target for bears. We expect the upcoming implementation of the ECB's QE program will grind EUR-USD to fresh lows toward parity over time. Resistance is at 1.1325 and 1.1444 (20-day moving average).

    [USD, JPY]
    USD-JPY has consolidated around 119.0 after logging a four-week peak at 119.22 on Friday in the wake of the strong U.S. payrolls report. We still that USD-JPY will be biased higher in the bigger picture as 'Abenomics' policies remain alive and well. A Bloomberg survey last week found 26 of 33 of economists forecasting new BoJ monetary expansion by the end of October. Resistance is marked at 119.87-96, support at 118.70-72.

    [GBP, USD]
    Cable is entrenched in the mid-to-low 1.52s following Friday's solid U.S. jobs report, though sterling is faring better against the euro, with EUR-GBP looking set for a test of the Jan-26 low at 0.7406. We expect sterling to hold up against the euro after solid patch of UK data, highlighted by the January PMI surveys that showed all three sectors (manufacturing, construction and services) beating expectations, mostly reversing unexpected weakness in December and pointing to encouraging growth momentum in Q1. Incoming data are expected to paint a similar picture. We are expecting that EUR-GBP with grind lower an test of 0.7000 in time.

    [USD, CHF]
    EUR-CHF is trading lower, back near 1.05 amid a generally softer euro. SNB's Jordan said over the weekend that the central bank is prepared to intervene in EUR-CHF if necessary, that, "We are observing the exchange rate situation as a whole ... If necessary we are active," but, " ... we do not speak about our transactions." He said that the franc remains "clearly overvalued" at around 1.0500, but said refrained to comment on what it considers the preferred franc levels or what it sees as a fair value. An "informed source" of the Tages Anzeiger newspaper last week said that the SNB is initiating a "soft floor" in EUR-CHF at 1.05-1.10. SNB's vice-chairman Danthine in late January that the SNB was still "fundamentally prepared to intervene in the foreign exchange market," and that Singapore's SGD basket policy "deserved closer examination." The SNB was widely reported to have intervened last Thursday from levels near 1.0500..

    [USD, CAD]
    USD-CAD choppy trade has continued, with the pair back above the 1.25 handle. The two-week low of 1.2351, seen last week, is a key near-term support. Overall, we still see there is more to come in the bull trend. Markets are speculating that the BoC will make another rate cut, and some energy analysts are expecting NYMEX oil prices to trade below the 2009 NYMEX crude low at $40.68 before the bear trend lows itself out, which would further crimp Canada's terms of trade. USD-CAD's August 2009 high at 1.3063 provides a big-picture target.

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