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By XE Market Analysis February 3, 2014 7:14 am
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    XE Market Analysis: North America - Feb 03, 2014

    A six-month low in China official PMI helped to maintain a risk-off theme, which saw the yen outperform and the dollar establish a generally softer tone. USD-JPY broke below the Jan-26 low and has logged a low of 101.67 so far, just five pips shy of the Dec-5 low. A breach here would bring the 200-day moving average at 100.36 into scope. EUR-JPY and other yen crosses have also made fresh lows. EUR-USD climbed about 30 pips on last week's New York closing level, making a peak of 1.3518 before settling around 1.3510. The risk-averse backdrop, meanwhile, saw EUR-CHF log a six-week low of 1.2210, despite SNB-speak affirming that a removal of the 1.20 limit would only be considered if inflation was much higher. Cable tumbled through 1.6400 for the first time in two weeks, extending to a low of 1.6323 in the wake of the sub-forecast Markit January manufacturing PMI for the U.K. AUD-USD recovered above 0.88 after dipping to a low of 0.8739 on the weak China data, gins that were partly fuelled by market speculation that the RBA may drop is easing bias at its February policy meeting this week following perky inflation data.

    [EUR, USD]
    EUR-USD has been consolidating recent losses around 1.3450-1.3500. We saw last week close out under the 200-day moving average for the first time since last July, and this supports bearish technical arguments for further losses. Projections from an apparent two-month trendline imply a target of 1.3445-1.3450. Resistance comes in at 1.3500-1.3505 (which encompasses the 200-day moving average) and marks a previous pivot level.

    [USD, JPY]
    USD-JPY broke below the Jan-26 low and has logged a low of 101.67 so far, just five pips shy of the Dec-5 low. A breach here would bring the 200-day moving average at 100.36 into scope. The risk averse backdrop the rise in the yen, a theme given fresh fuel by the six-month low in the official China manufacturing PMI. EUR-JPY and other yen crosses have also made fresh lows. USD-JPY projected trendline targets the 100.7 level. Trend resistance comes in at 102.40 and resistance can also be expected at 102.80-103.00.

    [GBP, USD]
    Cable's double rejection from forays above 1.6600 in late January has left a bearish tone in place, with the pair subsequently breaching both its 20- and 50-day moving averages. Big support can now be expected at 1.6395-1.6400, which marks former daily lows. A breach here would bring the Jan-6 low of 1.6337 and the mid-January low of 1.6307 into scope.

    [USD, CHF]
    EUR-CHF sank to a six-week low as risk aversion found fresh impetus from a six-month low in official China manufacturing PMI data. This came despite SNB-speak affirming that a removal of the 1.20 limit would only be considered if inflation was much higher. Key support is marked at 1.2200, ahead of the Dec-17 cycle low of 1.2167. We don't advise speculative accounts to hold long CHF exposures below 1.2100 given the threat of SNB intervention ahead of 1.2000.

    [USD, CAD]
    USD-CAD looks to be in the early stages of forming a topping formation. Last week's run to a five-week peak of 1.1224 came with declining bullish momentum, which is a sign that the underlying trend is weakening. Resistance is marked at 1.1175 and 1.1200, which would look to hold on a daily closing level basis to confirm potential of a topping formation in development. Key support is at 1.1000-1.1030, which encompasses as cluster of recent daily lows and highs.

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