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By XE Market Analysis February 11, 2015 6:38 am
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    XE Market Analysis: North America - Feb 11, 2015

    EUR-USD continued to ply a relatively narrow range, oscillating around the 1.1300 level. Grexit concerns remain to the forefront into today's Eurogroup meeting, which will focus on Greece, though we shouldn't hope for a quick deal ahead of tomorrow's EU leaders summit. USD-JPY edged out a fresh one-month high at 119.90 after breaking yesterday's peak at 119.22 during Asian trade, which was quiet with Japanese markets closed for the National Foundation holiday. This extends the gains seen since last Friday's solid employment report, which boosted the dollar's yield advantage versus the yen and other currencies. USD-CAD extended to an eight-day high at 1.2640, which is four pips short of the Feb-3 peak, amid a fresh dip in front-month NYMEX crude prices below $50. Sterling continued its outperforming streak. Cable rose to six-day highs near 1.5300, bringing the Feb-6 peak at 1.5351 and the 50-day moving average at 1.5354 into scope. EUR-GBP concomitantly dipped, below 0.7400 for the first time since January 2008 in making a low of 0.7391.

    [EUR, USD]
    EUR-USD continues to ply a relatively narrow range that's been oscillating around the 1.1300 level. Grexit concerns remain to the forefront with the focus today on the Eurogroup meeting on Greece. Hopes for a quick deal ahead of tomorrow's EU leaders summit will likely be disappointed. Athens has been swinging between a conciliatory tone amid its first foreign visits and a hard-line stance in speeches intended for the domestic audience, but it is clear that so far both sides are not willing to make major concessions. Ultimately, both sides are eager to keep Greece in the Eurozone, however, and some sort of deal is likely to emerge, but that is unlikely to happen this week and the uncertainty will mean ongoing volatility in peripheral yields and pressure on the euro. Yield differentials also remain in the dollar's favour following the strong U.S. jobs report last week, over 163 bp at the 10-year maturity level versus 145 bp seen been the payrolls data last Friday. 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 1.1359-60 and 1.1398 (20-day moving average).

    [USD, JPY]
    USD-JPY rallied to a new one-month high of 119.90 after breaking yesterday's peak at 119.22 during Asian trade (in the absence of Tokyo markets which were closed for the National Foundation holiday). This extends the gains seen since last Friday's solid U.S. employment report, which boosted the dollar's yield advantage versus the yen and other currencies. We continue to anticipate that USD-JPY's bias higher will persist in the bigger picture, concomitantly with 'Abenomics' policies. A Bloomberg survey late last month found 26 of 33 of economists forecasting new BoJ monetary expansion by the end of October. Key resistance is marked in the 119.87-96 zone (which encompasses today's peak and a series of former daily lows). Support is at 119.46-50.

    [GBP, USD]
    Sterling continued to outperform, posting gains today against both the dollar and the euro. Cable has risen to six-day highs above 1.5299, bringing the Feb-6 peak at 1.5351 (which is a six-week high) into scope and the 50-day moving average at 1.5354. EUR-GBP has concomitantly dipped, below 0.7400 for the first time since January 2008 in making a low so far of 0.7391. The break of the 2008 low at 0.7805 and option barriers at 0.7800 can be considered a key trend affirming development. We have been expecting sterling to hold up better against the euro than the dollar after a 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. We are expecting EUR-GBP will grind lower an test of 0.7000 in time. Resistance is at 0.7450-60.

    [USD, CHF]
    EUR-CHF has settled in the upper 1.04s after trading as low at 1.0414 earlier this week amid general euro weakness. 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 extended to an eight-day high at 1.2640, which is four pips short of the Feb-3 peak, amid a fresh dip in front-month NYMEX crude prices below $50. The U.S. dollar is also outperforming again amid favourable yield differential movements, which were sparked by last Friday's solid U.S. jobs report. We expect a test of the trend high at 1.2799. The two-week low at 1.2351, seen last week, is now viewed as a key 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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