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By XE Market Analysis February 13, 2018 7:17 am
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    XE Market Analysis: North America - Feb 13, 2018

    USD-JPY led broader dollar declines today, which was further aided by a rally in Cable following above-forecast CPI data out of the UK. USD-JPY dove over 1%, more than double the decline the dollar has seen so far versus the euro and other currencies today, in making a five-month low of 107.41. This has swung September's low at 107.31 into focus. Buying around 108.00 was quickly absorbed, and a series of sell stops were reportedly triggered under the figure. The yen's outperformance appears to be tracking losses in U.S. stock futures, with S&P 500 futures pointing to opening losses on Wall Street of more than 0.5%. EUR-USD lifted into four-session terrain above 1.2350 as the dollar came under pressure. Cable logged a two-session high at 1.3924, breaching above a two-week trend line at 1.3898, after UK CPI came in at 3.0% y/y in January, unchanged from December and contrary to the median forecast for a dip to 2.9% m/m. AUD-USD saw a four-day high at 0.7874, aided by data showing Australian January business conditions rising to 19 from 13, with overall confidence lifting to a reading of 12, up from 11.

    [EUR, USD]
    EUR-USD lifted into four-session terrain above 1.2350 as the dollar came under pressure, even though European equity markets and U.S. index futures came under pressure after a two-day rebound. We remain bearish of EUR-USD, basing this view on the rekindled commitment of the Fed to a tightening policy course (which is looking to be on track to hike the funds rate four times this year, starting at the March FOMC), juxtaposed to the ECB's evident disquiet about euro strength (expect more complaints into the G20 summit). Initial EUR-USD resistance is at 1.2335-38.

    [USD, JPY]
    USD-JPY dove over 1%, more than double the decline the dollar has seen so far versus the euro and other currencies today, in making a five-month low of 107.41. Last September's low at 107.31 is now in focus. Buying around 108.00 was quickly absorbed, and a series of sell stops were reportedly triggered under the figure. The yen's outperformance appears to be tracking losses in U.S. stock futures, with S&P 500 futures falling by 0.7% decline, extending from the modest 0.2% decline that was seen earlier at the London open and pointing to opening losses on Wall Street yesterday. This follows the best two-day rally in over two years, which in turn follows the worse weekly performance two years. The price action accords with the narrative that global markets have entered an era of heightened volatility. News out of Japan today include remarks from Japan Economy Minister Motegi, who argued that Abe's stance on monetary policy (i.e. ultra dovish) must be maintained. Japan January PPI came in at 0.3% m/m, as expected, after 2.7% y/y in the month prior.

    [GBP, USD]
    The pound firmed up on above-forecast UK CPI data, which came in at 3.0% y/y in January, unchanged from December, contrary to the median forecast for a dip to 2.9% m/m. Core CPI also lifted to 2.7% y/y from 2.5%, above the expected 2.6% y/y rate. Her Majesty's currency is presently showing a 0.6% gain versus the dollar, and a moderate 0.2% advance against the euro, though it still down in the case against the yen, which is the day's outperformer. The perkier than expected CPI data follows the BoE's hawkish guidance shift last week, which said monetary policy may have to be tightened sooner and by more than envisaged previously as a consequence of rising demand, a narrowing output gap, and lacklustre productivity. Cable logged a two-session high at 1.3924, breaching above a two-week trend line at 1.3898. Next UK data of note will be January retail sales figures, on Friday. Brexit negotiations, which are in a crucial phase, will likely remain a wild card font of volatility for sterling markets.

    [USD, CHF]
    EUR-CHF broke lower last week, leaving a four-month low at 1.1446. The cross has since settled in the lower 1.1500s. We expect directional bias to remain to the downside while the risk-off phase persists. The cross is seeing its biggest correction seen since the Swiss franc started to trend lower in mid last year, reflecting EUR-USD declines amid dollar outperformance and euro selling amid the ECB's evident disquiet about the extend of the euro's recent rally, which looks to have had a dampening impact on hawkish voices at the ctral bank. There is also some concern appearing in market research notes about the Italian election in early March, given the popularity of EU-sceptic Northern League.

    [USD, CAD]
    USD-CAD has gained come 3 big figures from the lows seen in late January and early Februray. The stellar U.S. January jobs report lit a fire under the U.S. dollar. The data, having rekindled expectations for Fed tightening, also sparked a spike on sovereign yields and a risk-off theme in global equity and commodity markets, including oil prices. This is a supportive backdrop for USD-CAD, and we expect the pair to remain underpinned this week. Support is at 1.2475-76.

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