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By XE Market Analysis February 19, 2014 7:02 am
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    XE Market Analysis: North America - Feb 19, 2014

    The USD is mixed, moderately firmer against the JPY and GBP, but modestly lower versus the EUR. EUR-USD eked out a fresh high for the year of 1.3773 in the early Asia session, but couldn't maintain momentum and since settled back in the mid-1.37 levels, posting a low of 1.3745 in London. Good selling interest has been reported both yesterday and today form 1.3775 and into 1.3800. USD-JPY ebbed modestly lower, testing 102.20 in the late London AM, correlating with the Nikkei stock index, which corrected after the very strong rally of yesterday. Sterling fell on an unexpected tick higher in the official unemployment figure to 7.2% in December from 7.1%. The BoE MPC minutes were also released, but had little bearing as the content was a reiteration of the insights expressed by last week's Inflation . AUD-USD settled higher after dipping to a fresh correction low of 0.8990 in early Sydney session. Data today showed Australian wage costs for Q4 up 0.7% q/q, which was above expectations, but the y/y figure was a record low at 2.6%.

    [EUR, USD]
    EUR-USD eked out a fresh high for the year of 1.3773 in the early Asia session, but couldn't maintain momentum and since settled back in the mid-1.37 levels. Good selling interest has been reported both yesterday and today form 1.3775 and into 1.3800. We still prefer selling EUR-USD into strength as prevailing levels are starting to look rich against fundamentals. ECB's Coeure repeated this week 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, despite recent softer data. 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]
    Risk appetite remained positive in Asia as stocks were generally higher across the region, except Tokyo, which correction moderately after the very gains that were seen yesterday in the wake of the BoJ announced it will expanding a lending facility. USD-JPY ebbed modestly lower, correlating with the Nikkei index, reaching sub-102.20 levels. Tuesday's high in USD-JPY of 102.74, which was the highest level seen this month, now marks resistance ahead of 103.00. Support is marked at 102.00, ahead of Monday's 11-day low of 101.39 (which was seen after weaker than expected Japanese GDP release). USD-JPY major support comes in at 100.00-100.59, the latter of which is the 200-day moving average.

    [GBP, USD]
    Sterling fell after U.K. labour data and the BoE minutes to the early February MPC meeting. An unexpected tick higher in the official unemployment figure to 7.2% in December from 7.1% caught newswire headlines. The more timely claimant count, in contrast, dropped more than expected, and the claimant rate fell to a new cycle low of 3.6%, though average household income growth remained firmly negative in real terms. The BoE MPC minutes, meanwhile, had little bearing as the content was a reiteration of the insights expressed by last week's Inflation Report. Cable dove over 60 pips in making a 1.6661 low, since steadying around 1.6680. EUR-GBP spiked 30 pips to a peak of 0.8255 and has since settled to the 0.8240-45 area. We still anticipate a more sustained correction in sterling. Cable resistance is now pegged at 1.6700.

    [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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