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By XE Market Analysis February 4, 2014 6:15 am
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    XE Market Analysis: North America - Feb 04, 2014

    The USD was near net unchanged levels in the late London AM session, though it saw fresh lows against the yen, which remained an outperformer as the stock rout continued, and also posted declines against the Aussie dollar after the RBA indicated a comparatively less dovish stance in its statement following its February policy meeting. Elsewhere, sterling rebounded from general weakness following a much stronger than expected U.K. construction PMI outcome. EUR-CHF recovered above 1.2200 after logging a fresh six-week low of 1.2184 during the Asian session.

    [EUR, USD]
    EUR-USD has consolidated to higher levels around 1.3500-1.3540, moving back above the 200-day moving average, but the big picture technical view still looks bearish. Last week closed under the 200-day moving average for the first time since last July, supporting bearish technical arguments for further losses. Projections from a two-month trendline imply a target of 1.3445-1.3450. Resistance comes in at 1.3550 and 1.3574-1.3581 (encompasses the Jan-31 high and the 20-day moving average).

    [USD, JPY]
    The yen has remained an outperformer as the stock rout continued. Yesterday's disappointing U.S. manufacturing ISM report, the six month low in China PMI data, and last week's second Fed taper, have collectively stoked the risk aversion theme. Japan's Economy Minister Amari said that investors are overreacting to the Fed's tapering, but his words of wisdom had little market impact. Both USD-JPY and EUR-JPY dropped to respective two-month lows of 100.75 and 136.23. Big USD-JPY support comes in at 100.00-100.36, the latter of which is the 200-day moving average. Initial resistance levels come in at 101.76-102.00, while trend resistance is above here at 102.40. Resistance can also be expected at 102.80-103.00.

    [GBP, USD]
    Sterling recovered on the strong construction PMI data, recouping some of its earlier losses. Cable popped about 40 s to a peak of 1.6342 while EUR-GBP shed nearly 30 pips in making a low of 0.8266. The market will likely settle down into tomorrow's services PMI. Bigger picture, 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. The breach of 1.6395-1.6400 and the January low of 1.6307 this week adds to the bearish view. We target the 1.6200-1.6220 area. Resistance is marked at 1.6400-1.6440, which encompasses a cluster of former daily highs and lows, and the 50-day moving average.

    [USD, CHF]
    EUR-CHF has been flirting with 1.2200 amid the backdrop of risk aversion in global markets. The Dec-17 cycle low of 1.2167 is back in scope. SNB-speak affirming that a removal of the 1.20 limit would only be considered if inflation was much higher has had little impact, though 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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