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By XE Market Analysis February 17, 2014 7:00 am
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    XE Market Analysis: North America - Feb 17, 2014

    The USD logged fresh lows in Asia, which continued the bear trend after a run of sub-expectations data out of the U.S, before rebounding during the European AM session. EUR-USD edged out a three-week high of 1.3725, then settled around 1.3700. There was no European data of note today. Moody's upgraded its outlook for Italy to stable from negative despite the latest episode of political uncertainty there, while ECB's Coeure repeated that the central bank is ready to take "decisive action if required." USD-JPY rebounded from an 11-day low of 101.39 that was seen during Tokyo trade on Monday, with the London market seeing better sense in taking the yen lower following a positive session across Asian stock markets, and in light of disappointing Q4 GDP data out of Japan. Sterling corrected after making fresh highs in Asia, with Cable diving to a low of 1.6720 so far after making new major-trend high of 1.6822. The London market reacted to Governor Carney reiteration over the weekend that interest rates will rise only when there is a sustainable growth in jobs and income, and also the latest storm-bashing that parts of the U.K. suffered, which is the latest episode of bad weather that is likely curtail GDP performance in Q1.

    [EUR, USD]
    EUR-USD edged out a three-week high of 1.3725 on Monday, which reflects continued USD weakness after a run of sub-expectations data out of the U.S. In the Eurozone, Moody's upgraded its outlook for Italy to stable from negative despite the latest episode of political uncertainty there. We still prefer selling EUR-USD into strength as prevailing levels are starting to look rich against fundamentals. ECB's Coeure repeated that the central bank is ready to take "decisive action if required" and the possible use of a negative deposit rate will likely remain a topic in ECBspeak into the March policy meeting. In the U.S., meanwhile, 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 rebounded from an 11-day low of 101.39 that was seen during Tokyo trade on Monday, with the London market seeing better sense in taking the yen lower following a positive session across Asian stock markets, and in light of the disappointing Japanese GDP data. USD-JPY resistance cane be expected at 102.00-102.04, which encompasses the present position of the 20-day moving average, ahead of 102.41 (Thursday's peak) and strong resistance at 103.00. Conditions are subdued as North American markets will not be opening today.

    [GBP, USD]
    Sterling has corrected after making fresh highs in Asia, with Cable diving to a low of 1.6720 so far after making new major-trend high of 1.6822. EUR-GBP has recovered to the high 0.81s, closing the gap lower that was seen in Asia. The London market reacted to Governor Carney reiteration over the weekend that interest rates will rise only when there is a sustainable growth in jobs and income, and also the latest storm-bashing that parts of the U.K. suffered, which is the latest episode of bad weather that is likely curtail GDP performance in Q1. The pound had been in strong demand since the BoE raised its GDP forecasts earlier in the month, although we have been wary as the BoE isn't in any rush to tighten policy with domestic pay awards remaining negative and inflation pressures waning.

    [USD, CHF]
    The CHF has traded firmer in recent sessions. EUR-CHF has drifted toward the 1.2200 area after making a two-week high of 1.2267 in the early part of last 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 this month has 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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