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By XE Market Analysis December 19, 2013 7:43 am
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    XE Market Analysis: North America - Dec 19, 2013

    The dollar consolidated in subdued trade following the across-the-board gain it saw following the Fed's decision to commence QE tapering. USD-JPY dipped to a correction low of 103.88 in Tokyo, down nearly 50 pips from the post-Fed major trend high of 104.36, before settling around 104.00. Decent selling was seen in EUR-JPY in Tokyo, reportedly a mixture of Japanese exporter selling and speculative account profit taking, which drove the cross nearly an entire big figure down from its major-trend peak of 142.90. EUR-USD extended to a two-week low of 1.3649 during Asia session amid the EUR-JPY dive, steadying around 1.3680 during the European AM. AUD-USD was slightly firmer in Europe at 0.8865 after making a three-year low of 0.8822. The CHF saw fresh correction lows versus the EUR and USD as the currency's safe haven premium unwinds now that the period of Fed policy uncertainty is over. EUR-CHF breached 1.2250, up from the pre-Fed eight-month low of 1.2166.

    [EUR, USD]
    EUR-USD extended post-Fed gains to a two-week low of 1.3649. Decent selling was seen in EUR-JPY in Tokyo, reportedly a mixture of Japanese exporter selling and speculative profit taking, and the cross pulled back nearly an entire big figure from the new major-trend peak of 142.90. News that EU finance ministers agreed on the bank failure plan had little impact. The euro's recent failures above 1.3800 had painted a technical picture of waning upside momentum, especially with levels having looked quite stretched above the 50- and 200-day moving averages relative to historical norms. Support now comes in at 1.3640 ahead of the Dec-6 low of 1.3618.

    [USD, JPY]
    USD-JPY surged to a new major-trend peak of 104.36, subsequently ebbing back to the 103.90 area during the Tokyo session. Decent selling was seen in EUR-JPY in Tokyo, reportedly a mixture of Japanese exporter selling and speculative profit taking, and the cross pulled back nearly an entire big figure from the new major-trend peak of 142.90. USD-JPY is likely to remain on an upward path, we are targeting 105.00, as the BoJ's stance, being set to do more QE, contrasts with that of the Fed.

    [GBP, USD]
    Sterling held its ground against the generally firm USD today after surging on Wednesday on news of the unexpected unemployment drop, which fell to 7.4% in October to complete a two-month 0.3 of a percentage point decline with the 99k dive in unemployment the biggest drop in over 13 years. The drop in the unemployment rate is much quicker than the BoE had projected under its forward guidance framework. The release of the BoE MPC minutes showed that members were concerned that any further "substantial" appreciation in sterling would slow the recovery, though this has largely been ignored by markets. Recent data, including the 18-year high in the CBI industrial trends figure, fits the prevailing status of the U.K. being one of the quickest expanding developed-nation economies. We have continued to target Cable to 1.6500.

    [USD, CHF]
    The CHF has established a weakening path in the wake of the FOMC's stock market friendly announcement, and the currency's safe haven premium is eroding now that the period of Fed policy uncertainty is over. EUR-CHF breached 1.2250, well up on the pre-Fed eight-month low of 1.2166, and looks biased to 1.2280 resistance, which marks a series of former lows seen between October and November. Support is now at 1.2220 and 1.2200. USD-CHF faces some resistance at 0.8960-70 and again at 0.9000, but can be expected to breach these over the coming sessions.

    [USD, CAD]
    USD-CAD surged in the wake of the Fed's decision to commence tapering, breaking above the recent trend high of 1.0707 and rallying to a new three-year peak of 1.0727. Although the Fed upgraded dovish forward guidance to offset its tapering announcement, the Fed's stance contrasts the move dovish BoC. Initial USD-CAD support comes in at 1.0700, ahead of 1.0650. The pair is looking stretched technically, which is to say by historical price deviations, so a bullish tactic would be to wait for near-support levels before entering a long position.

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