Home > XE Currency Blog > XE Market Analysis: Europe - Feb 13, 2015

AD

XE Currency Blog

Topics7281 Posts7326
By XE Market Analysis February 13, 2015 3:12 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 5205
    XE Market Analysis: Europe - Feb 13, 2015

    EUR-USD traded to an eight-day peak of 1.1439 amid broader dollar softness today. The euro is trading above its 20-day moving average for the first time since Dec-17, suggesting that the big-picture bear trend has come to a pause. The ceasefire agreement in Ukraine and subduing of Grexit concerns (though we're not out of the woods yet on that front, with Greece at the EU leaders summit today in search of a "new contract" with the Eurozone) have helped give the euro and underpinning. USD-JPY stumbled from the 118.90 area at the NY close to lows of 118.41 in Tokyo, finding a footing ahead of the 20-day moving average at 118.29. USD-CAD is steadier around 1.2500 after yesterday spilling under Wednesday's low at 1.2572 on route to the low at 1.2538. AUD-USD clawed out a two-day peak at 0.7892 despite remarks from RBA Governor Stevens that a further decline in the Aussie is likely, and, along with his colleague Kent, remarking that confidence mong Australian businesses was at a low ebb.

    [EUR, USD]
    EUR-USD traded to an eight-day peak of 1.1439 amid broader dollar softness today. The euro is trading above its 20-day moving average for the first time since Dec-17, suggesting that the big-picture bear trend has come to a pause. The ceasefire agreement in Ukraine and subduing of Grexit concerns (though we're not out of the woods yet on that front, with Greece at the EU leaders summit today in search of a "new contract" with the Eurozone) have helped give the euro and underpinning. Grexit concerns and geopolitics aside, yield differentials remain firmly in the dollar's favour, which are now over 166 bp in the case of the 10-year T-bond versus Bund, comparing to the 145 bp level that had been prior to the stellar U.S. payrolls report last Friday. We also expect the upcoming implementation of the ECB's QE program will grind EUR-USD to fresh lows, toward parity over time. The 11-year low at 1.1098, seen on Jan-26, offers an interim target. Support is now marked at 1.1394-1.1400 and 1.1381 (20-day moving average), resistance at 1.1486 (Feb-6 peak) and 1.1498-1.1500 (which encompasses the Fed-6 high).

    [USD, JPY]
    The yen extended its no-more-stimulus rally heading into Friday-the-13th with the dollar a little more chastened in early Tokyo trade, as USD-JPY stumbled from the 118.90 area at the NY close to lows of 118.40 in Tokyo. The N-225 sagged 0.3% as well with lingering weakness on "BoJ sources" story the day prior that extra stimulus might be counterproductive. A Reuters poll, however, indicated that any further BoJ easing might occur in the second half of the year, while CPI is seen rising 0.3% in Q1 net of the tax effect vs 0.5% previously. Apparently where there's a lingering liquidity trap, there's still hope for policy stimulus.

    [GBP, USD]
    Cable broke above its 50-day moving average at 1.5344 and the Feb-5 peak at 1.5352 on route to the high-so-far of 1.5420. This is the first time Cable has traded above the 50-day average since Jul-29 last year, suggesting that the bear tend from the Jul-14 high at 1.7192 to the Jan-22 low at 1.4951 has come to an end. Key resistance is pegged at 1.5486-15507, which encompasses a series of previous daily lows. EUR-GBP logged an eight-year low at 0.7372 on Thursday. We are anticipating the cross will grind lower an test of 0.7000 in time, with the ECB commencing QE in March and with yesterday's remarks by BoE's Carney emphasizing a contrasting policy stance as he said that the next move in the UK would likely be a tightening.

    [USD, CHF]
    EUR-CHF recovered to the 1.0600 area from sub-1.05 levels on news of the agreement on Ukraine, which has been supportive of the euro. This extends the recovery the cross has seen since trading as a low at 1.0414 earlier in the week, which was seen during a bout general euro weakness. SNB's Jordan reaffirmed this week 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 is steadier around 1.2500 after yesterday spilling under Wednesday's low at 1.2572 on route to the low at 1.2538. The decline occurred concomitantly with a rise in front-month NYMEX crude futures back above $50 on news of the agreement on Ukraine, which has been supportive of the CAD and other commodity bloc currencies. Yield differentials still remain in the U.S. dollar's favour, however, and this should curtail USD-CAD's downside (unless we witnessing the beginning of a sea change in oil prices, which looks premature as yet). Technical support levels are at 1.2500 and 1.2435 (20-day moving average). USD-CAD's August 2009 high at 1.3063 provides a big-picture target.

    Paste link in email or IM