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By XE Market Analysis February 6, 2015 6:31 am
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    XE Market Analysis: North America - Feb 06, 2015

    The dollar firmed slightly versus an underperforming euro, but was softer against most other currencies. EUR-USD ebbed to sub-1.1450 levels after leaving a peak at 1.1498 in New York trade on Thursday. USD-JPY drifted to the lower 117s but has remained shy of yesterday's Tokyo-session low at 117.02. Cable remained established above 1.53, holding firm after making a one-month peak at 1.5343 yesterday. AUD-USD clocked a one-week high at 0.7859 after the RBA's Statement on Monetary Policy (SOMP) today, which downgraded growth and inflation forecasts by a little less than most analysts expected, though the central bank stressed that the Aussie remains above most estimates of fair value. The Aussie subsequently settled lower, around 0.7830-40. A Bloomberg survey found 11 of 24 economists polled expect another rate cut by next month, while 13 expect an easing by April.

    [EUR, USD]
    EUR-USD ground lower, to sub-1.1450 levels after leaving a peak at 1.1498 in New York trade on Thursday. The 20-day moving average capped the run higher yesterday, and is presently sitting at 1.1477. The same average roughly capped the rally on Tuesday, which left a two-week high at 1.1534. The reported reappearance of the SNB on Thursday, buying EUR-CHF, has given the euro a prop. Markets will now settle into today's release of the January U.S. jobs report, which we expect to rise 230k in the headline (median same) with unemployment remaining unchanged at 5.6%), though we note downside risks layoff announcement data. The 11-year low at 1.1098, seen on Jan-26, looks safe for now, though we still expect the upcoming implementation of the ECB's QE program will grind EUR-USD to fresh lows toward parity over time. Key resistance is at 1.1477 (20-day moving average) and 1.1534 (Tuesday's high), ahead of 1.1540-50.

    [USD, JPY]
    USD-JPY drifted to the lower 117s but has remained shy of yesterday's Tokyo-session low at 117.02. The downward slowing 20-day moving average, presently sitting at 117.74 has been acting as a cap since Jan-20, and is a key resistance point to watch now. Momentum indicators also point to a growing, albeit mild, downward bias. Recent lows at 116.87-116.94 mark key near-term support. A break below here would bring the Jan-16 low at 115.85 into scope. There has been a flood of policymaker-speak out of Japan this week, though to little market impact as it reaffirmed the general commitment to the 2.0% inflation target. We still expect that USD-JPY will be biased higher in the bigger picture as 'Abenomics' policies remain alive and well. A Bloomberg survey last week found 26 of 33 of economists forecasting new BoJ monetary expansion by the end of October.

    [GBP, USD]
    Cable has established a foothold above 1.53 after making a one-month peak at 1.5343. EUR-GBP has also remained below 0.75. The outperformance in sterling comes after solid UK data this week. Yesterday's Halifax house price index showed an unexpected 2.0% m/m surge in January, while the January PMI surveys showed all three sectors (manufacturing, construction and services) beating expectations, mostly reversing unexpected weakness in December and pointing to encouraging growth momentum in Q1. We advise sterling bulls to take the EUR-GBP route, where we are anticipating a test of 0.7000 in time.

    [USD, CHF]
    EUR-CHF has been holding in a range around 1.0550-1.06 after rallying over 1.5% on Thursday on reported SNB intervention, which sent the cross back over 1.0600 from sub-1.05 levels. This fits the story reported by an "informed source" of the Tages Anzeiger newspaper earlier in the week, who said that the SNB is initiating a "soft floor" in EUR-CHF at 1.05-1.10. SNB's vice-chairman Danthine last week that the SNB was still "fundamentally prepared to intervene in the foreign exchange market," and that Singapore's SGD basket policy "deserved closer examination." He had also said that the franc was still overvalued, but didn't mention what would be an appropriate level.

    [USD, CAD]
    USD-CAD choppy trade has continued, with the pair ebbing back under 1.2500 though remaining above the two-week low of 1.2351, seen mid-week. Overall, we still see there is more to come i the bull trend. Markets are speculating that the BoC will make another rate cut, and some energy analysts are expecting NYMEX oil prices to trade below the 2009 NYMEX crude low at $40.68 before the bear trend lows itself out, which would further crimp Canada's terms of trade. USD-CAD's August 2009 high at 1.3063 provides a big-picture target.

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