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By XE Market Analysis February 12, 2014 7:54 am
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    XE Market Analysis: North America - Feb 12, 2014

    EUR-USD took a dive following weaker than expected Eurozone industrial production data, which declined 0.7% m/m in December. The euro dropped nearly 50 pips in making a low of 1.3587. EUR-JPY dipped to within a few pips of 139.00, which helped USD-JPY dip to around the 102.30 area. The yen maintained a firm tone despite stock markets rallying in both Asia and Europe, which was prompted by a strong, export-driven rise in China's trade surplus in January, more than offsetting an indifferent set of economic figures out of Japan. Supporting the yen was a remark by BoJ member Kiuchi, who mooted that more easing may do more harm than good. GBP-USD logged a two-week high of 1.6558 in the wake of the BoE Inflation Report, which showed an strong upward revision to 2014 growth, to 3.4% y/y from 2.8% previously. AUD-USD logged a fresh one-month peak of 0.9067 during Sydney trade, since settling below 0.9040.

    [EUR, USD]
    EUR-USD turned lower after disappointing Eurozone production data, dropping back under 1.3600 and putting Monday's two-week peak of 1.3683 out of scope. The bigger picture technical picture has shifted to more neutral than bearish following the recovery above the 20- and 50-day moving averages, and the break above a six-week bearish trend line, but we still prefer selling into strength as we think there will be a growing focus on the possibility of the ECB taking further easing measures at its March meeting, while we expect the Fed to remain on its tapering course. There have been reports of decent selling interest into 1.3688-1.3700.

    [USD, JPY]
    The yen maintained a firm tone despite stock markets rallying in both Asia and Europe, which was prompted by a strong, export-driven rise in China's trade surplus in January, more than offsetting an indifferent set of economic figures out of Japan. Supporting the yen was a remark by BoJ member Kiuchi, who mooted that more easing may do more harm than good. This comes after trade data has shown a strong swing to deficit territory, which has largely been a consequence of yen weakness. USD-JPY initial resistance is marked by Tuesday's 10-day peak at 102.70. Initial support is seen at 102.00, while major USD-JPY support comes in at 100.00-100.47, the latter of which is the 200-day moving average. Strong resistance can be expected at 102.80-103.00.

    [GBP, USD]
    GBP-USD logged a two-week high of 1.6558 in the wake of the BoE Inflation Report, which showed an strong upward revision to 2014 growth, to 3.4% y/y from 2.8% previously. However, the BoE also downgrade inflation projections and relegated the 7.0% unemployment target in its forward guidance criteria, and we recommend selling sterling into strength. The double rejection from forays above 1.6600 in late January remain a feature on the daily chart. We continue to target a return to the 1.6200-1.6220 area. Resistance is marked into 1.6500.

    [USD, CHF]
    EUR-CHF edged out a two-week high of 1.2267 on Tuesday as the Swiss currency continued to unwind some of its safe haven premium, reflecting the general recovery in stock markets. The Dec-17 cycle low of 1.2167 has now fallen out of scope. SNB-speak last week affirmed that a removal of the 1.20 limit would only be considered if inflation was much higher had little impact. We wouldn't advise speculative accounts to hold long CHF exposures below 1.2100 given the threat of SNB intervention ahead of 1.2000.

    [USD, CAD]
    We continue to favour selling into USD-CAD gains as the price action from late January to early February confirmed a head-and-shoulders pattern topping formation. The recent run to a five-week peak of 1.1224 came with declining bullish momentum, which was a sign that the underlying trend was weakening. Projections target the 1.0800-1.0820 area. Initial resistance is at 1.1000, while key resistance is marked at 1.1100, ahead of 1.1175 and 1.1200.

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