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By XE Market Analysis February 16, 2017 2:50 am
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    XE Market Analysis: Europe - Feb 16, 2017

    The dollar has remained on a back foot, marginally extending the correction from post-U.S. data highs of yesterday. USD-JPY has fallen back under 114.00, logging a low of 113.76 in Tokyo trade today. The move comes after the pair topped out at near three-week highs of 114.95 in the aftermath of yesterday's hotter U.S. CPI outcome. Good selling was reported from the highs, with profit taking ramping up into the key 115.00 level, where a wave of Japanese exporter offers are reportedly sitting. The 50-day moving average is at 114.88. EUR-USD has breached above yesterday's peak in making 1.0624. AUD-USD rallied to a three-month peak at 0.7732, since settling just under 0.7700. We favour buying into dollar weakness given the outlook for multiple Fed rate hikes this year.

    [EUR, USD]
    EUR-USD retraced all of its post-U.S. CPI losses, and then some, rallying to 1.0609 highs from a one-month low of 1.0522. Fund buying was reportedly a factor in the move higher, with European names noted selling Treasuries and buying EUR-USD after the CPI data. The 50-day moving average, currently at 1.0614 was breached, though a close under the level will keep pressure on the euro. Trend resistance is at 1.0630-35. Political uncertainties, loaded with existential threats, hand of the Eurozone, and this backdrop should keep the euro capped, especially, in the case of EUR-USD, with the Fed heading for multiple rate hikes this year.

    [USD, JPY]
    USD-JPY has fallen back under 114.00, logging a low of 113.76 in Tokyo trade today. The move reflects a drop in the dollar, after the pair topped out at near three-week highs of 114.95 in the aftermath of yesterday's hotter U.S. CPI outcome. Good selling was reported from the highs, with profit taking ramping up into the key 115.00 level, where a wave of Japanese exporter offers are reportedly sitting. The 50-day moving average is at 114.88.

    [GBP, USD]
    Sterling recovered losses seen in the wake of the UK labour market report yesterday, which revealed an unexpected deceleration in average household income data. Cable has largely tracked EUR-USD's price action, recovering as dollar gains unwound. A low was left at 1.2383, which by our data exactly matched the 50-day moving average. The was the second time in just over a week that Cable has failed to sustain losses below 1.2400. The UK calendar brings the official retail sales report for January today, where we anticipate a 0.6% m/m rebound after the unexpectedly sharp 1.9% m/m drop in December, though be warned as already-released January surveys of the sector by the CBI and BRC suggest downside risk. We think that Cable will be prone to bouts of declines in the months ahead, with the Fed heading to further tightening and the BoE likely to remain on a neutral footing. The start of the UK's exit negotiations with the EU -- the point that the rubber will hit the tarmac -- is now nearly upon us, with PM May reportedly gunning for a March-7 trigger-date of Article 50. Cable support is at 1.2440. The 20-day moving average at 1.2524 marks resistance.

    [USD, CHF]
    EUR-CHF is has traded heavily so far this week, settling in the mid 1.06s. Last week's eight-month low at 1.0632 is back in range. The weakness of the cross stems from rising political risks in France into the April Presidential election. The Swiss franc was little-affected by the latest volley of SNB-speak last Monday, with president Jordan saying that negative interest rates are "indispensable" in capping an overvalued currency, while and his colleague Maechler argued that there would be "heavy consequences" of an even stronger franc for the Swiss economy and pension funds. The franc's strength against the euro, which is a good proxy of the broader trade-weighted value of the Swiss currency, evidently remains an ongoing concern for Swiss policymakers. At least the franc is one currency unlikely to attract a Trump accusation of being undervalued.

    [USD, CAD]
    USD-CAD remains heavy after failing to sustain gains above 1.3100 yesterday. Wednesday's ten -day low at 1.3024 is back in the frame. With OPEC struggling to induce upside traction in oil prices, we have been tentatively recommending buying dips on the Fed versus BoC view and Trump's desire to get a better deal for the U.S. out of a revised NAFTA agreement. Resistance is at 1.3182 (200-day moving average) and 1.3192-1.3200. Support is as 1.3014 and 1.3000.

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