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By XE Market Analysis February 18, 2014 7:01 am
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    XE Market Analysis: North America - Feb 18, 2014

    EUR-USD edged out a three-week high of 1.3734, reflecting on this occasion general euro perkiness as the dollar itself firmed against the yen, sterling and most other currencies. The euro move came despite a disappointing German ZEW survey outcome, which cited concerns about the possible global impact from the recent slowdown in U.S. recovery momentum. The yen took a tumble following the unexpected BoJ announcement that it will double a funding tool to Y7 tln. USD-JPY jumped to a high of 102.74, the highest level seen this month, before settling. This marks a recovery from Monday's 11-day low of 101.39, which was seen after weaker than expected Japanese GDP. EUR-JPY also hit a new high for the month of 140.86. An ensuing correction of sterling found extra fuel from the release of January U.K. inflation data that unexpectedly dipped to a new cycle low of 1.9% from 2.0% in December. AUD-USD dipped and tested 0.9000, which seemed to coincide with BlackRock forecasting a decline to 0.8500.

    [EUR, USD]
    EUR-USD edged out a three-week high of 1.3734, reflecting on this occasion some general euro perkiness as the dollar is mixed against other currencies. The move came despite a disappointing German ZEW survey outcome, which cited concerns about the possible global impact from the recent slowdown in U.S. recovery momentum We still prefer selling EUR-USD into strength as prevailing levels are starting to look rich against fundamentals. ECB's Coeure repeated on Monday 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 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]
    The yen weakened following the BoJ announcement that it will double a funding tool to Y7 tln, which was unexpected. USD-JPY jumped to a high of 102.74, the highest level seen this month, before settling around the 102.35-60 area. This marks a recovery from Monday's 11-day low of 101.39 that was seen after weaker than expected Japanese GDP on Monday. EUR-JPY also hit a new high for the month of 140.86. USD-JPY major support is now some way off, at 100.00-100.55, the latter of which is the 200-day moving average. Strong resistance can be expected at 103.00.

    [GBP, USD]
    Sterling has continued to correct on Tuesday, both before and after the release of January U.K. inflation data that unexpectedly dipped to a new cycle low of 1.9% from 2.0% in December. The median forecast had been for an unchanged 2.0% outcome, though we had flagged downside risk and the BoE forecast last week's quarterly Inflation Report that CPI will ebb to a low of 1.7% in the coming months. The data supports the BoE's prevailing policy stance and its recent de-emphasizing of the unexpectedly quick drop in the unemployment rate. Cable has fallen back under 1.6700 and EUR-GBP climbed above 0.8220. Cable support is at 1.6645-50, which encompasses the Feb-14 low.

    [USD, CHF]
    EUR-CHF halted the recent decline toward the 1.2200 area as global stock markets rebound and the safe haven premium of the Swiss currency unwinds. The Dec-17 cycle low of 1.2167 has slipped back out of scope. Support is marked at 1.2206 (the Feb-13 low) and 1.2200. 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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