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By XE Market Analysis February 21, 2018 7:27 am
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    XE Market Analysis: North America - Feb 21, 2018

    The dollar continued to hold firm. EUR-USD extended lower for a fourth consecutive session, logging a four-session low of 1.2307, which extends the correction from the 38-month high seen on Friday at 1.2556. The day's low was seen in the wake of the release of preliminary Eurozone February PMI survey data, which missed expectations and gave a presently bearish market a cue to sell. USD-JPY lifted for a fourth straight session, this time logging a four-session high of 107.90 in Tokyo, extending the rebound from the 15-month low seen last Thursday at 105.54. Japanese data today included the flash manufacturing PMI for February, which ebbed to a 54.0 headline reading form 54.8 in January. The vice minister of finance for international affairs (the power position regarding forex intervention decisions), Asakawa, said that "I cannot help but assess the [yen] movements as one-sided," and noted that surging U.S. Treasury yields is the "beginning of a sea change." Sterling has been trading softer today, aided on its way by an unexpected upward tick in the UK unemployment figure, to 4.4% from 4.3%. Cable edged out a five-session low at 1.3904.

    [EUR, USD]
    EUR-USD extended lower for a fourth consecutive session, logging a four-session low of 1.2307, which extends the correction from the 38-month high seen on Friday at 1.2556. Trend support draw from the daily low points of this nascent down trend comes in at 1.2261-62, and resistance at 1.2374-75. The day's low was seen in the wake of the release of preliminary February PMI survey data, which missed expectations and gave a presently bearish market a cue to sell. We expect down phase will persist as markets are putting focus on the spike in U.S. Treasury yields following last week's perkier than anticipated CPI data out. Last week's low at 1.2206 provides downside target.

    [USD, JPY]
    USD-JPY lifted for a fourth straight session, this time logging a four-session high of 107.90 in Tokyo, extending the rebound from the 15-month low seen last Thursday at 105.54. EUR-JPY and other yen crosses are also firmer, though by a lesser magnitude than USD-JPY, as a broader bid in the dollar has also been at play. Japanese data today included the flash manufacturing PMI for February, which ebbed to a 54.0 headline reading form 54.8 in January. The vice minister of finance for international affairs (the power position regarding forex intervention decisions), Asakawa, said that "I cannot help but assess the [yen] movements as one-sided," and noted that surging U.S. Treasury yields is the "beginning of a sea change." We expect USD-JPY will remain buoyant for now. Support is at 107.10-12.

    [GBP, USD]
    Sterling has been trading softer today, aided on its way by an unexpected upward tick in the UK unemployment figure, to 4.4% from 4.3%. Cable edged out a five-session low at 1.3904. The UK data calendar next brings the February CBI distributive sales survey (Thursday) and the second estimate of Q4 GDP (also Thursday). Brexit negotiations, now at the sharp end, are ongoing, and will continue to be a font of potential volatility for sterling. Cable has trend support at 1.3846-46.

    [USD, CHF]
    EUR-CHF has been in consolidation mode in the mid 1.1500s over the last week after breaking lower in the week before, when a four-month low at 1.1446 was seen. The revival in risk appetite has helped prop up the cross.

    [USD, CAD]
    USD-CAD clocked a 12-day high of 1.2671, with the pairing being buoyed by a generally firmer tone in the U.S. dollar and a soft oil prices, which are down a further 1% today (WTI benchmark), extending the near 2% tumble that was seen from yesterday's high. Technically, USD-CAD price action has been bullish since early February by the yardstick of Dow theory higher highs and higher lows, while the momentum indicators suggest that the uptrend is not so far looking stretched (the 14-day RSI reading is presently at 62.4). Support is at 1.2587-90. Some key Canadian data releases are looming, with retail sales up tomorrow and inflation data up on Friday. We expect retail sales to dip 0.3% m/m in December on the heels of the tepid 0.2% gain in November. The ex-autos sales aggregate is projected to decline 0.2%. As for CPI, we project a 0.4% m/m rebound in January after the 0.4% drop in December, while the y/y figure is seen slowing to a 1.5% y/y pace from 1.9% y/y on the back of a well documented base effect after a one-off elevation in prices in January of 2017. Average weekly earnings are also due on Friday, where we expect a 0.3% m/m rise in December.

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