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By XE Market Analysis February 16, 2018 7:22 am
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    XE Market Analysis: North America - Feb 16, 2018

    The dollar has lifted out of new lows were seen in Tokyo. The USD index (DXY) is now showing a fractional 0.1% gain after showing a 0.3% decline at the lows. The index left a 37-month low at 88.26, and is presently trading at 88.70. EUR-USD tipped nearly 80 pips from the the 38-month high the pair saw in Asia in making its intraday low at 1.2474. USD-JPY has scaled back above 106.20 after seeing a 15-month low at 105.54. The dollar's decline to new lows in Asia and rebound in Europe mirrors the price action we saw yesterday, all amid a backdrop of rising global equity markets. We expect more of the same while the risk-on vibe persists, though advise caution for further bouts of volatility as major economies wean themselves off monetary stimulus.

    [EUR, USD]
    EUR-USD ascended above the January high on route to a 38-month high at 1.2556, with the pair making today the sixth consecutive up session. Dollar weakness has continued to drive the upward bias, with the U.S. currency underperforming amid a backdrop of reviving risk appetite in global markets. The euro has been trading more mixed relative to other currencies. More of the same looks likely, at least while the risk-on theme lasts. EUR-USD has trend support at 1.2457-58.

    [USD, JPY]
    USD-JPY climbed to a new 15-month low against the yen, at 105.54. Continued gains in global stock markets have continued to inspire dollar selling, as investors seek out higher yielding opportunities. USD-JPY declines came despite the nomination of Kuroda for another term at the helm of the BoJ, along with nominations for the two deputy governor positions of inflationist candidates, Amamiya and Wakatabe. We expect more of the same while the prevailing risk-on vibe persists. USD-JPY has trend resistance 106.35-38.

    [GBP, USD]
    Cable spilt lower in the wake of a UK retail sales miss. The pair has hit a low of 1.4067 so far, which is nearly 70 pips on the intraday high that was posted in the Asian session at 1.4745. The pound also weakened versus the euro, though a spate of underperformance in the common currency saw these losses unwind. January UK retail sales came in at 0.1% m/m, well off the median forecast for a 0.6% m/m rise. On the Brexit front, meanwhile, the EU's chief negotiator Barnier clarified that the UK's red lines meant that a Swiss or Norway type model would be out of the question, affirming, once again, that the British government's have-cake-eat-it approach (maintaining access to the single market without observing the EU's four freedom of movement pillars for goods, services, capital and people) is simply out of touch with reality. Cable has support at 1.4027-30.

    [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 ebbed to 10-day lows in the mid 1.24s. The revival of risk appetite on global markets, which has lifted oil prices, has been a positive for the Canadian dollar just as it has been a negative lead of the U.S. dollar. This backdrop should keep USD-CAD biased lower for now, though we think that the near decade era of low volatility, near constant equity market gains, is over. Upcoming data out of Canada include the December manufacturing report (Friday), expected to reveal a 0.5% gain in shipment values after the 3.4% surge in November. Before this, the January existing home sales report is on tap later today. USD-CAD has support at 1.2435-26.

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