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By XE Market Analysis February 11, 2014 3:23 am
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    XE Market Analysis: Europe - Feb 11, 2014

    The AUD extended recent gains following a net positive set of Australian data, while the USD retained its post U.S. jobs report soft tone. The yen remained steady-to-soft as stock markets in Asia continued to rally (including China, despite the Securities Journal saying that 2014 will be "very difficult" for the economy), though trade was subdued by Japan's National Foundational public holiday. A perky outcome in the U.K.'s BRC January retail sales measures (up 3.9% y/y) aided a bid tone in GBP-USD, which edged out a nine-day peak of 1.6433 before settling around 1.6415. EUR-USD posted a 12-day peak in the early Asia session, of 1.3678, before settling. AUD-USD hit a four-week peak of 0.9015, prompted by the NAB business confidence January release coming in at +8 from +6 in December, and a house price index showing a median-beating +3.4% gain, data which offset an unexpected 1.9% decline in housing finance in December. USD-JPY posted a range of 101.99-102.40, remaining within yesterday's range in the Tokyo market's absence.

    [EUR, USD]
    EUR-USD posted a 12-day peak in the early Asia session, of 1.3678, before settling. This extended the gains seen following last Thursday's ECB unchanged policy announcement and Friday's U.S. jobs report disappointment. The bigger picture technical picture has shifted to more neutral than bearish following the recovery above the 20- and 50-day moving averages, and the break above a six-week bearish trend line, though there are reports of decent selling interest into 1.3688-1.3700. Support comes in at 1.3630-40 and 1.3595-1.3600, which encompasses the 20-day moving average. We still prefer selling into strength as we think there will be a growing focus on the possibility of the ECB taking further easing measures at its March meeting, while we expect the Fed to remain on its tapering course.

    [USD, JPY]
    USD-JPY posted a range of 101.99-102.40, remaining within yesterday's range in the Tokyo market's absence. Japanese markets were closed Tuesday for the National Foundation public holiday. USD-JPY's initial resistance is marked by Monday's 10-day peak at 102.65. The yen's recent advance has come to a halt as the risk-off theme takes a breather amid a show of positive corporate earnings and decent-enough U.S. payrolls data last week. Major USD-JPY support comes in at 100.00-100.36, the latter of which is the 200-day moving average. Strong resistance can be expected at 102.80-103.00.

    [GBP, USD]
    Cable's technical picture remains tentatively bearish, despite the recovery above 1.6400, following the double rejection from forays above 1.6600 in late January and the subsequent breach (and continued hold below) of both the 20- and 50-day moving averages. We continue to target a return to the 1.6200-1.6220 area. Resistance is marked in the region of 1.6433-1.6440, which encompasses recent daily highs, and the current levels of the 20- and 50-day moving average.

    [USD, CHF]
    EUR-CHF has settled after edging out a 10-day high of 1.2250 on Monday as the Swiss currency unwound some of its safe haven premium. The cross had recently been flirting with 1.2200 amid the backdrop of risk aversion in global markets, though the steadying in stock markets has lent the cross some support. The Dec-17 cycle low of 1.2167 has now fallen out of scope. SNB-speak last week affirmed that a removal of the 1.20 limit would only be considered if inflation was much higher had little impact. We wouldn'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 price action confirmed the development of a topping formation. The recent run to a five-week peak of 1.1224 came with declining bullish momentum, which was a sign that the underlying trend was weakening. The breach and hold below of a series of consolidation lows in the 1.1030-1.1050 region strengthened the bearish case. The apparent head-and-shoulders pattern that was formed between late January and early February carries a projection target to 1.0800-1.0820. Key resistance is marked at 1.1100, ahead of 1.1175 and 1.1200.

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