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By XE Market Analysis February 16, 2017 7:22 am
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    XE Market Analysis: North America - Feb 16, 2017

    The softer dollar theme continued. EUR-USD extended to a two-week peak of 1.0641, and USD-JPY declined to a two-day low of 113.55. The dollar also posted losses versus sterling, and the dollar-bloc currencies. There have been little in the way fresh leads, with the calendars in both Asia and Europe thin.

    [EUR, USD]
    EUR-USD extended to a two-week peak of 1.0641 as the dollar continued to unwind recent gains. The euro needs to make a daily close above the 50-day moving average, at 1.0615, to affirm a more positive technical picture. Political uncertainties, loaded with existential threats, blights the Eurozone outlook, and this backdrop should keep the euro capped, especially, in the case of EUR-USD with the Fed heading for multiple rate hikes this year.

    [USD, JPY]
    USD-JPY declined to a two-day low of 113.55 amid broad dollar losses. The declines today halts a run of five consecutive up days. Support is at 113.38, the 20-day moving average, and 113.35, Tuesday's low. We retain a bullish view on the back of the contrasting Fed versus BoJ policy outlooks, with the former expected to trigger three more 25 bp hikes this year and the latter still pondering whether its down with easing.

    [GBP, USD]
    The pound has settled to near net unchanged levels on the week, after some choppy price action versus the dollar. Cable recouped to near 1.2500 after logging a nine-day low at 1.2383 yesterday. The UK's official retail sales report for January is up tomorrow, where we anticipate a 0.6% m/m rebound after the unexpectedly sharp 1.9% m/m drop in December, though be warned as already-released January surveys of the sector by the CBI and BRC suggest downside risk. We think that Cable will be prone to bouts of declines in the months ahead, with the Fed heading to further tightening and the BoE likely to remain on a neutral footing. The start of the UK's exit negotiations with the EU -- the point that the rubber will hit the tarmac -- is now nearly upon us, with PM May reportedly gunning for a March-7 trigger-date of Article 50. Cable support is at 1.2440. The 20-day moving average at 1.2524 marks resistance.

    [USD, CHF]
    EUR-CHF is has traded heavily so far this week, settling in the mid 1.06s. Last week's eight-month low at 1.0632 is back in range. The weakness of the cross 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 remains heavy after failing to sustain gains above 1.3100 yesterday. Wednesday's ten -day low at 1.3024 is back in the frame. 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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