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By XE Market Analysis February 13, 2014 2:55 am
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    XE Market Analysis: Europe - Feb 13, 2014

    The AUD took a hit on a disappointing jobs report out of Australia, while the JPY and safe haven CHF currency traded firmer as equities in Asia corrected after a run of six consecutive up days. There were reports in China of trust fund defaults. AUD-USD dove over a point to a 0.8927 and didn't see much of a bounce thereafter, holding below 0.8942 in the period since. There wasn't much positive about the January Australian jobs report. The headline unexpectedly fell 3.7K (versus the 15k gain median) and the December figure was revised lower to -23.0k (from-22.6K) and the unemployment rate ticked higher to 6.0% from 5.8%. The IMF also said that the AUD should fall to 0.8000. Elsewhere, USD-JPY sank to a five-day low of 109.98, since settling just above 102.00. EUR-JPY was heavy too, around 139.00, but managed to remain above its low from yesterday at 138.67. Japan's economy minister said it would be difficult to the raise sales tax to 10% if economy slows while BoJ's Kuroda said that it remains desirable to achieve a 2% inflation rate as soon as possible. EUR-USD recovered to the low 1.36s after foraying below 1.3600 yesterday. ECB's Coere said that the drop in inflation would not be sufficient to spark further ECB action.

    [EUR, USD]
    EUR-USD recovered to the low 1.36s after foraying below 1.3600 yesterday. ECB's Coere said that the drop in inflation would not be sufficient to spark further ECB action. 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. 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 sank to a five-day low of 109.98, since settling just above 102.00. EUR-JPY was heavy too, around 139.00, but managed to remain above its low from yesterday at 138.67. The perkiness in the yen correlated inversely with a correction in equities after a run of six consecutive up days. There were reports in China of trust fund defaults. Japan's economy minister said it would be difficult to the raise sales tax to 10% if economy slows while BoJ's Kuroda said that it remains desirable to achieve a 2% inflation rate as soon as possible. USD-JPY resistance is marked by Tuesday's 10-day peak at 102.70. Initial support is seen at 101.98-102.00, while major support comes in at 100.00-100.47, the latter of which is the 200-day moving average. Strong resistance can be expected at 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]
    The CHF traded firmer on Thursday as equities corrected in Asia after a run of six consecutive up days. There were reports in China of trust fund defaults. EUR-CHF fell to a one-week low of 1.2207. The cross had made a two-week high of 1.2267 on Tuesday as the Swiss currency continued to unwind some of its safe haven premium, reflecting what had been a general recovery in stock markets. The Dec-17 cycle low of 1.2167 is now back in 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 1.10130-1.1050, while key resistance is marked at 1.1100, ahead of 1.1175 and 1.1200.

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