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By XE Market Analysis February 9, 2015 6:35 am
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    XE Market Analysis: North America - Feb 09, 2015

    EUR-USD drifted back to the 1.1330 area after failing to sustain gains above 1.1350 as the broader correction in the dollar fizzled out. The pair had clocked one-week low at 1.1295 in early Asia-Pacific trade before rebounding. USD-JPY tested the 118.50 level before steadying, which followed the dollar's correction. Stops had been triggered through 118.70-72. Cable is entrenched in the mid-to-low 1.52s following Friday's solid U.S. jobs report, though sterling is faring better against the euro, with EUR-GBP drifting back under 0.7450 after failing to sustain gains above here. AUD-USD has managed to lift from Sydney lows, where a two trading day low was seen at 0.7748 following weak China import numbers, which were down almost 20% y/y in December.

    [EUR, USD]
    EUR-USD drifted back to the 1.1330 area after failing to sustain gains above 1.1350 as the broader correction in the dollar fizzled out. The pair had clocked one-week low at 1.1295 in early Asia-Pacific trade before rebounding. The new low had reflected general dollar firmness following the strong U.S. jobs report on Friday, and the market continues to feel fundamentally bearish, although not the one-way bet it seemed for much of the time between late December and ate January. We expect the upcoming implementation of the ECB's QE program will grind EUR-USD to fresh lows, toward parity over time. The 11-year low at 1.1098, seen on Jan-26, offers an interim target. Resistance is at 1.1325 and 1.1444 (20-day moving average).

    [USD, JPY]
    USD-JPY has drifted to the 118.60-70 area after breaking the Tokyo low at 118.72. The move reflects a broader dollar correction. The pair logged a four-week peak at 119.22 on Friday in the wake of the strong U.S. payrolls report. We expect that USD-JPY will be biased higher in the bigger picture as 'Abenomics' policies remain alive and well. A Bloomberg survey in late January found 26 of 33 of economists forecasting new BoJ monetary expansion by the end of October. USD-JPY resistance is marked at 119.87-96, support at 118.70-72.

    [GBP, USD]
    Cable is entrenched in the mid-to-low 1.52s following Friday's solid U.S. jobs report, though sterling is faring better against the euro, with EUR-GBP looking set for a test of the Jan-26 low at 0.7406. We expect sterling to hold up against the euro after solid patch of UK data, highlighted by the January PMI surveys that showed all three sectors (manufacturing, construction and services) beating expectations, mostly reversing unexpected weakness in December and pointing to encouraging growth momentum in Q1. Incoming data are expected to paint a similar picture. We are expecting that EUR-GBP with grind lower an test of 0.7000 in time.

    [USD, CHF]
    EUR-CHF is trading lower, back under 1.05 amid a generally softer euro. SNB's Jordan said over the weekend that the central bank is prepared to intervene in EUR-CHF if necessary, that, "we are observing the exchange rate situation as a whole ... If necessary we are active," but, " ... we do not speak about our transactions." He said that the franc remains "clearly overvalued" at around 1.0500, but said refrained to comment on what it considers the preferred franc levels or what it sees as a fair value. An "informed source" of the Tages Anzeiger newspaper last week said that the SNB is initiating a "soft floor" in EUR-CHF at 1.05-1.10. SNB's vice-chairman Danthine in late January that the SNB was still "fundamentally prepared to intervene in the foreign exchange market," and that Singapore's SGD basket policy "deserved closer examination." The SNB was widely reported to have intervened last Thursday from levels near 1.0500.

    [USD, CAD]
    USD-CAD choppy trade has continued, with the pair back above the 1.25 handle. The two-week low of 1.2351, seen last week, is a key near-term support. Overall, we still see there is more to come in 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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