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By XE Market Analysis February 12, 2014 3:24 am
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    XE Market Analysis: Europe - Feb 12, 2014

    The AUD was the main mover out of the main currencies, rallying following a stock market friendly testimony from new Fed Chairperson Yellen, who signalled policy continuity, the passage of the debt ceiling vote in the U.S. House of Representatives, and unexpectedly strong China export data (which drove the surplus to $ 31.9 bln from $25.6 bln). AUD-USD logged a fresh one-month peak of 0.9067 in a continuation of the rally seen since last week when the RBA signalled a shift from a dovish to a neutral bias. The Chinese trade data helped offset a more indifferent set of economic figures out of Japan, where January machine orders fell 15.7% m/m (-4.0% expected) and the December tertiary index fell 0.4% m/m (-0.3% expected). Both USD-JPY and EUR-JPY drifted moderately lower, despite the gains in stock markets, as BoJ member Kiuchi said that more easing may do more harm than good. USD-JPY settled around the 102.50 area after making a peak of 102.70 during the New York PM session yesterday. EUR-USD posted a narrow range in the low-to-mid 1.36s.

    [EUR, USD]
    EUR-USD 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 1.3620 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]
    There was an indifferent set of economic figures out of Japan, where January machine orders fell 15.7% m/m (-4.0% expected) and the December tertiary index fell 0.4% m/m (-0.3% expected). Both USD-JPY and EUR-JPY drifted moderately lower, despite the gains in stock markets, as BoJ member Kiuchi said that more easing may do more harm than good. This comes after trade data has shown a strong swing to deficit territory, which has largely been a consequence of yen weakness. USD-JPY initial resistance is marked by Tuesday's 10-day peak at 102.70. Initial support is seen at 102.00, while major USD-JPY support comes in at 100.00-100.47, 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 edged out a two-week high of 1.2267 on Tuesday as the Swiss currency continued to unwind some of its safe haven premium, reflecting the general recovery in stock markets. 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]
    We continue to favour selling into USD-CAD gains as the price action from late January to early February confirmed a head-and-shoulders pattern 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. Projections target the 1.0800-1.0820 area. Initial resistance is at 1.1000, while key resistance is marked at 1.1100, ahead of 1.1175 and 1.1200.

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