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By XE Market Analysis February 14, 2014 7:27 am
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    XE Market Analysis: North America - Feb 14, 2014

    USD weakness persisted. EUR-USD forayed above 1.37, making a peak of 1.3714, which is a couple of pips shy of the Jan-27 peak. Stronger than expected GDP figures out the Eurozone inspired the rally, while the euro seemed unaffected by news of the resignation of Italian PM Letta. The Jan-24 peak at 1.3739 looks to be in scope now, though good selling interest was reported above 1.3700. USD-JPY tumbled over 80 pips from a Tokyo session high of 102.41 in making a 101.56 one-week low before settling around 101.80 during the European AM session. Stop selling played a notable role in the thin conditions, as blizzard conditions in Tokyo meant that many market participants didn't show for work. While stocks in Asia were generally higher today, in Japan the Nikkei-225 posted a 1.5% decline, which market commentaries pinned the firmer yen on. GBP-USD surged above 1.6700 for the first time in nearly three years. EUR-GBP dipped below 0.8200, reflecting the outperformance of sterling. The pound has rallied this week following the BoE's upgraded growth forecasts and introduction of "phase II" of forward guidance.

    [EUR, USD]
    EUR-USD forayed above 1.37, making a peak of 1.3714 so far, which is a couple of pips shy of the Jan-27 peak. Stronger than expected GDP figures out of France and Germany inspired the rally, while the euro seemed unaffected by news of the resignation of Italian PM Letta. The Jan-24 peak at 1.3739 looks to be in scope now, though good selling interest was reported above 1.3700. We still prefer selling EUR-USD into strength as prevailing levels are starting to look rich against fundamentals. The possible use of a negative deposit rate will likely remain a topic in ECBspeak due to the disinflation threat, and we see that both the U.S. recovery and the Fed's tapering course as remaining on track. Resistance is marked at 1.3739 (the Jan-24 peak). Bigger picture, the multiple rejections from 1.38+ levels from last October had been associated with a notably drop in momentum following a six-month rally phase.

    [USD, JPY]
    USD-JPY tumbled over 80 pips from the session high of 102.41 in making a 101.56 one-week low in Tokyo trade today before settling around 101.80 during the European AM session. Stop selling played a notably role in the thin conditions, as blizzard conditions in Tokyo meant that many market participants didn't show for work, with orders triggered through 102.00 and 101.70. While stocks in Asia were higher, in Japan the Nikkei-225 posted a 1.5% decline, which market commentaries pinned the firmer yen on. USD-JPY resistance is marked by Tuesday's 10-day peak at 102.70. Major support comes in at 100.00-100.47, the latter of which is the 200-day moving average. Strong resistance can be expected at 103.00.

    [GBP, USD]
    GBP-USD surged above 1.6700 for the first time in nearly three years. EUR-GBP dipped below 0.8200, reflecting the outperformance of sterling. The pound has rallied this week following the BoE's upgraded growth forecasts and introduction of "phase II" of forward guidance. We are wary about Cable's advance as the BoE isn't in any rush to tighten policy despite economic recovery with domestic pay awards remaining negative and inflation pressures waning. We also see both the U.S. recovery and the Fed's tapering course as remaining on track. We would recommend selling above 1.6700, where market commentaries are reporting selling interest is residing.

    [USD, CHF]
    The CHF traded firmer in recent sessions as equities dipped. EUR-CHF fell to a one-week low of 1.2206. The cross had made a two-week high of 1.2267 earlier in the week as the Swiss currency unwound some of its safe haven premium, reflecting what had been a general recovery in stock markets. The Dec-17 cycle low of 1.2167 is now back in 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 1.10130-1.1050, while key resistance is marked at 1.1100, ahead of 1.1175 and 1.1200.

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