Home > XE Currency Blog > XE Market Analysis: Europe - Jan 24, 2014

AD

XE Currency Blog

Topics1372 Posts1392
By XE Market Analysis January 24, 2014 3:06 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 1039
    XE Market Analysis: Europe - Jan 24, 2014

    Risk has remain off during the Asia session so far. The AUD dove to a fresh three-and-a-half year low of 0.8689 following RBA-speak from member Ridout, who said that a AUD-USD exchange rate of "around 0.80" would be a "fair deal," along with news that China may issue alert on credit risks in its coal industry. Elsewhere, USD-JPY dipped to a fresh low of 102.97 in post-London New York trade and has since settled around 103.40-50. There was reportedly net yen selling at the Tokyo fixing. The Jan-13 low of 102.85 can now be considered a key support level. EUR-USD made a brief foray above 1.3700, the first time above here since Jan-3, before turning back to near net unchanged levels around 1.3680. EUR-CHF dipped to a three-week low of 1.2275 in New York, and has since consolidated around 1.2280-2300. The risk-off environment has supported the safe-haven Swiss.

    [EUR, USD]
    EUR-USD made a brief foray above 1.3700, the first time above here since Jan-3. Stronger than expected Eurozone PMI data on Thursday had lit a fire under the pairing, while the dollar itself has come under more general pressure amid the risk-off backdrop, itself driven by an emerging market cascade following weak a China PMI flash estimate for January. The Eurozone data surprise had caught the speculative market running with a net euro short position. The data muddies the fundamental picture with regard to EUR-USD, but we don't anticipant extended upside progress, with the Fed on course to make a further tapering in QE asset purchases at next week's FOMC. We mark resistance at 1.3700-05 ahead of the Jan-2 high of 1.3758. Support at 1.3660.

    [USD, JPY]
    USD-JPY dipped to a fresh low of 102.97 in post-London New York trade on Thursday and has since settled around 103.40-50. There was reportedly net yen selling at the Tokyo fixing. The Jan-13 low of 102.85 can now be considered a key support level. The yen found support amid the risk-off theme that was established in currency markets following the unexpected dive in the flash HSBC-Markit China PMI this week, with the currency firming as stocks declined, as is the usual pattern. Bigger picture, we continue to expect that USD-JPY's major-trend peak at 105.44 to fall as the BoJ's expansive monetary policy should continue to drive the yen to fresh lows during 2014. Data this month showed Japan's monetary base surged 46.6% y/y in December to a record Y193.5 tln, illustrating the impact that the BoJ's reflationary policy is having. The BoJ is targeting a monetary base to Y270 tln by the end of the year.

    [GBP, USD]
    Sterling has been mixed this week, firmer against the USD (making a two-year high above 1.6600) but weaker versus the EUR following strong Eurozone PMI data. The U.K. fundamental picture is somewhat muddy. We had the unexpected drop in unemployment to 7.1% in November, but the January CBI distributive trades and industrial trends surveys disappointed, describing a moderation in economic recovery following a patch of above-trend growth in the second half of last year. The CBI also pointed out that ongoing real declines in average household incomes (presently running at -1% y/y based on most recent income and CPI data), which is one of the key factors that the BoE is emphasizing in its efforts to downplay the sharp drop in unemployment. Cable resistance is 1.6650.

    [USD, CHF]
    EUR-CHF dipped to a three-week low of 1.2275 in New York, and has since consolidated around 1.2280-2300. The risk-off environment has supported the safe-haven Swiss, with prevailing levels comfortably above the SNB 'danger levels' -- levels there the central bank may think about intervening in defence of its 1.2000 limit. Support is pegged at 1.2275 and 1.2250. Resistance comes in at 1.2300 and at 1.2317-20, which encompasses the 200-day simple moving average.

    [USD, CAD]
    USD-CAD reportedly ran into very solid bids under 1.1100 over the last day, with corporate and option types seen stepping in. Many buyers likely missed the boat after the BoC on Wednesday, and took quick advantage of the moderate dip to step back in. The first area of resistance is now seen at 1.1175. In the bigger picture, the 1.1675 level is being noted, the 62% retracement of the 2009 to mid-2011 plunge.

    Paste link in email or IM