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By XE Market Analysis February 15, 2017 6:17 am
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    XE Market Analysis: North America - Feb 15, 2017

    The dollar remain underpinned in the wake of Yellen's Senate testimony. EUR-USD forayed into new one-month low territory under 1.0550, and USD-JPY lifted to 16-day highs above 114.50. Cable got a helping push from an unexpected deceleration in UK wage data, which offset a dubiously large claimant count fall. The pair posted and eight-day low at 1.2420, and the pound also saw moderate losses against the yen and euro. Forex markets continued to ignore Eurozone data, which today confirmed a widening in the area's trade surplus in 2016. The Swedish krona dipped after the Riksbank said it wants a weaker currency in its post-policy announcement press release. The central bank left its repo rate at -0.5%, and its QE program unchanged, as had been widely anticipated.

    [EUR, USD]
    EUR-USD extended the post-Yellen losses today, foraying into one-month low territory under 1.0550. Fed chair Yellen left the door open to a March rate hike during her Senate testimony yesterday. Yellen remained balanced enough to maintain Wall Street optimism, which is a double positive for the dollar. We expect the greenback to remain a buy-on-dips for now, though markets are still trying to fathom the ultimate net impact Trumpenomics -- protectionism versus looser fiscal policies -- will have on the dollar. On the euro side, the April-23 Presidential election in France poses an existential threat to the euro, with the suddenly scandal-embroiled candidate Fillon having increased the odds of a shock victory by far-right leader, and advocate of leaving the euro and EU, Le Pen (although polls suggest she will still fail at the second round of the election). Greece also remains a thorn in the euro's side. EUR-USD broke former trend support at 1.0580-82, which now reverts as resistance. The 50-day moving average is at 1.0610. Support is at 1.0530-35.

    [USD, JPY]
    USD-JPY has lifted to 16-day highs above 114.50 in the wake of Fed Chair Yellen's testimony before the Senate, where she left the door open for a March hike, which was enough of a surprise from the normally dovish Yellen to prompt a market reaction. Yield differentials and a positive risk-appetite, with Yellen striking a balance between dovishness and hawkishness, have conspired to keep the yen on a back foot. We expect USD-JPY to clear 115.00 shortly, with the January-27 high at 115.37 offering a target thereafter. Support is at 113.80-82.

    [GBP, USD]
    Sterling took a bath despite strong headline jobs data, with the markets focusing on the deceleration in the rate of wage growth, coming at a time of rising inflation and chiming with prevailing concerns of eroding real income growth in an economy that has largely been driven by consumer spending in recent years. The BoE has communicated that it is keeping a close eye on wage developments. The January claimant count dove 42.4k, which a huge change for this series, with the claimant count rate unexpectedly falling, to 2.1% from 2.3%. There is conjecture in markets that the ONS stats office's tinkering with methodology (specifically relating to the universal credit system) may have been an exacerbating factor. The official ILO unemployment figure remained at 4.8% in December, which is an 11-year low. Cable logged an eight-day low at 1.2420, and is showing a 0.3% decline on the day (as of the late London AM session). The pound is also showing declines versus the yen and euro. Cable support is at 1.2282-85 (which encompasses the 50-day moving average), while the 20-day moving average at 1.2525 marks resistance. The February-7 low at 1.2327 provides a downside target.

    [USD, CHF]
    EUR-CHF is lower following the dive in EUR-USD on Tuesday, which was inspired by Yellen leaving the door open to a rate hike at the March FOMC during her Senate testimony. Last week's eight-month low at 1.0632 is back in range. The backdrop weakness of the cross has seen stems from rising political risks in France into the April Presidential election. The Swiss franc was little-affected by the latest volley of SNB-speak last Monday, with president Jordan saying that negative interest rates are "indispensable" in capping an overvalued currency, while and his colleague Maechler argued that there would be "heavy consequences" of an even stronger franc for the Swiss economy and pension funds. The franc's strength against the euro, which is a good proxy of the broader trade-weighted value of the Swiss currency, evidently remains an ongoing concern for Swiss policymakers. At least the franc is one currency unlikely to attract a Trump accusation of being undervalued.

    [USD, CAD]
    USD-CAD clocked a nine-day low at 1.3024 yesterday, which followed a run of five consecutive down days. With OPEC struggling to induce upside traction in oil prices, we have been tentatively recommending buying dips on the Fed versus BoC view and Trump's desire to get a better deal for the U.S. out of a revised NAFTA agreement. Resistance is at 1.3182 (200-day moving average) and 1.3192-1.3200. Support is as 1.3014 and 1.3000.

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