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By XE Market Analysis February 19, 2014 3:02 am
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    XE Market Analysis: Europe - Feb 19, 2014

    The main currencies have been pretty steady ahead of a batch of risk events on Wednesday, though risk appetite remained positive in Asia as stocks were generally higher across the region, except Tokyo, which correction moderately after the very gains that were seen yesterday. EUR-USD eked out a fresh high for the year of 1.3773 in the early Asia session, but couldn't maintain momentum and since settled back in the mid-1.37 levels. Good selling interest has been reported both yesterday and today form 1.3775 and into 1.3800. USD-JPY ebbed modestly lower, to sub-102.20 levels, but the trading range little more than 25 pips. AUD-USD dipped to a fresh correction low of 0.8990 in early Sydney session, but recovered to the 0.9020-30 area as showed Australian wage costs for Q4 up 0.7% q/q (above expectations, from 0.5% prior)and the leading index rising 0.8% (0.2% before).

    [EUR, USD]
    EUR-USD eked out a fresh high for the year of 1.3773 in the early Asia session, but couldn't maintain momentum and since settled back in the mid-1.37 levels. Good selling interest has been reported both yesterday and today form 1.3775 and into 1.3800. We still prefer selling EUR-USD into strength as prevailing levels are starting to look rich against fundamentals. ECB's Coeure repeated this week that the central bank is ready to take "decisive action if required," and the possible use of a negative deposit rate will likely remain a topic in ECBspeak into the March policy meeting. In the U.S., meanwhile, we see that both the U.S. recovery and the Fed's tapering course as remaining on track, despite recent softer data. Bigger picture, the multiple rejections from 1.38+ levels from last October had been associated with a notably drop in momentum following a six-month rally phase.

    [USD, JPY]
    Risk appetite remained positive in Asia as stocks were generally higher across the region, except Tokyo, which correction moderately after the very gains that were seen yesterday in the wake of the BoJ announced it will expanding a lending facility. USD-JPY ebbed modestly lower, correlating with the Nikkei index, to sub-102.20 levels. The trading range during Tokyo was little more than 25 pips. Tuesday's high in USD-JPY of 102.74, which was the highest level seen this month, now marks resistance, ahead of 103.00. Support is marked at 102.00, ahead of Monday's 11-day low of 101.39 (which was seen after weaker than expected Japanese GDP release). USD-JPY major support comes in at 100.00-100.59, the latter of which is the 200-day moving average.

    [GBP, USD]
    Sterling has found its feet after correcting to a low of 1.6654 on Tuesday. EUR-USD has also steadied, around 0.8240 after spiking from sub-0.8100 levels during the early part of the week. The dip in January CPI to a new cycle low of 1.9% y/y supports the BoE's prevailing policy stance and its recent de-emphasizing of the unexpectedly quick drop in the unemployment rate. Cable support is at 1.6645-50, which encompasses the Feb-14 low. Resistance at 1.6700-10 and 1.6740.

    [USD, CHF]
    EUR-CHF halted the recent decline toward the 1.2200 area as the rebound in global stock markets takes the impetus out of the safe haven premium of the Swiss currency. The Dec-17 cycle low of 1.2167 has now slipped back out of scope. Support is marked at 1.2206 (the Feb-13 low) and 1.2200. SNB-speak this month has 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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