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By XE Market Analysis January 7, 2015 1:44 am
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    XE Market Analysis: Europe - Jan 07, 2015

    EUR-USD and Cable made new trend lows while USD-JPY, AUD-USD and other pairings were relatively stable. EUR-USD traded to a near nine-year low of 1.1842 (EBS low) after taking out Monday's nadir at 1.1860. The pair subsequently rebounded to the 1.1865-80 area. Cable traded to a low at 1.5109, which is seven pips shy of the July 2013 low, before recouping to the 1.5140-45 area. The December version of the UK BRC shop price index was released (overnight, UK time) and came in at -1.7% y/y, re-highlighting disinflationary pressures. USD-JPY, meanwhile, lifted from the mid-118's and subsequently oscillated around 119.00. Demand was seen at the Tokyo fixing from importer corporate accounts, while a steadier tone in Japanese equity markets was conducive to yen weakness. Data and market-relevant developments were thin on the ground today. Of some note was the New Zealand ANZ commodity price index for December, which came in at -4.4% m/m from November's -1.6%.

    [EUR, USD]
    EUR-USD traded to a near nine-year low of 1.1842 (EBS low) after taking out Monday's nadir at 1.1860. The pair subsequently rebounded to the 1.1865-80 area. We remain EUR-USD bearish, even if Fed tightening remains a tentative proposition as markets are expecting that the ECB will announce QE at its Jan-22 policy meeting, with concerns about disinflation outweighing the recent improvement in survey data. EUR-USD resistance is marked at 1.1900 and 1.1927-30, support at 1.1842 and 1.1800.

    [USD, JPY]
    USD-JPY lifted from the mid-118's and subsequently oscillated around 119.00. Demand was seen at the Tokyo fixing from importer corporate accounts, while a steadier tone in Japanese equity markets was conducive to yen weakness. We remain USD-JPY bullish with 'Abenomics' policies likely to maintain the dollar's yield advantage over the yen, even if Fed tightening prospects remain tentative. USD-JPY resistance is marked by former range lows at 119.96-120.09, and support is marked at 1.1835 and 1.1800-05.

    [GBP, USD]
    Sterling traded to a low at 1.5109 against the dollar, which is seven pips shy of the July 2013 low, before recouping to the 1.5140-45 area. The December version of the UK BRC shop price index was released (overnight, UK time) and came in at -1.7% y/y, re-highlighting disinflationary pressures. Cable remains in a bigger picture bear trend, which has been persisting since the July cycle high at 1.7192 and which has accelerated in early new year trade. The sharp drop in the UK composite PMI, which at 55.4 is the lowest since May 2013, along with a CPI rate of 1.0%, will strengthen the dovish voices at the BoE's Monetary Policy Committee.

    [USD, CHF]
    EUR-CHF has established a range below 1.2050 after spiking to a 1.2096 peak Dec-18 after the SNB implemented a negative interest rate of -0.25%. SNB member Zurbruegg recently argued that a negative interest rate would be an effective tool as permanent excess liquidity in the Swiss financial system exceeds 300 billion francs. SNB boss Jordan had said recently that upward pressure on the franc has "intensified," and the central bank said it will enforce the cap with "utmost determination" and is prepared to take further steps if necessary.

    [USD, CAD]
    USD-CAD punched out a new trend high near 1.1850 as oil prices continue to sink further into five-year low territory below $48 (the 2009 low at $41.68 is on the radar), which is blighting Canada's terms of trade. The August 2009 high at 1.3063 provides a big-picture target.

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