Home > XE Currency Blog > XE Market Analysis: North America - Feb 26, 2014

AD

XE Currency Blog

Topics1363 Posts1383
By XE Market Analysis February 26, 2014 7:09 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 1032
    XE Market Analysis: North America - Feb 26, 2014

    Another low in the CNY was the main development as the main currencies traded in narrow ranges. EUR-USD mostly flat-lined at familiar levels in the mid-1.37s, having quickly unwound a pop high to 1.3757, and USD-JPY was steady in the mid-to-low 102s. Cable retuned to near net-unchanged levels on the day after dipping in the initial wake of the second-estimate U.K. Q4 GDP report as the y/y figure was revised to 2.7% from 2.8%. BoE-speak today was dovish, with MPC member Dale saying there won't be a tightening "anytime soon" and his colleague Miles remarking that there is "plenty of scope to encourage strong demand in the economy without driving inflation up." In Asia, USD-CNY recorded an official mid-point of 6.1192, down on yesterday's closing 1.1266 level, the weakest since July last year. This reflects a policymaker change in stance due to economic slowing and concerns about liquidity excess. In Japan, BoJ Governor Kuroda said that monetary policy will remain expansive even if the Fed continues to to taper. Elsewhere, AUD-USD dove below Tuesday's low to a nadir of 0.8969 before steadying around 0.90.

    [EUR, USD]
    EUR-USD has continued to oscillate in the 1.37s. We continue to anticipate further EUR-USD weakness. Pressure on the ECB to take further monetary action into its March policy meeting has been growing. Eurozone PMI data that showed France moving further into contraction territory and the overall Eurozone composite reading falling slightly, coming amid a backdrop of disinflation. Technically, the EUR-USD picture looks bearish. A two-week run higher to last week's peak of 1.3773 stalled shy of 1.3800, and this follows the multiple rejections from 1.38+ levels over the October to December period, which had been associated with a notable drop in upside momentum following a six-month rally phase.

    [USD, JPY]
    USD-JPY has been steady around the low 102s, unmoved by BoJ Governor Kuroda's remarks that monetary policy will remain expansive even if the Fed continues to taper. There is little overall directional impetus in USD-JPY. BoJ policy would favour continued weakness, but the threat of China slowdown and its negative consequences on global stock markets is an offsetting yen-supportive force. Resistance is marked at last Friday's three-week peak at 102.83, ahead of 103.00-103.10, which encompasses the 50-day moving average. Support is at 102.00 and 101.66, ahead of major support at 100.00-100.71, the latter of which is the 200-day moving average.

    [GBP, USD]
    Sterling is back to near net-unchanged levels on the day after dipping in the initial wake of the revised Q4 GDP as the y/y figure was revised to 2.7% from 2.8%. Some of the details of the report were pretty encouraging, however, particularly business investment which rose 8.7% y/y (business investment has been a notably weak area since 2008). Meanwhile, BoE-speak today as been dovish, with MPC member Dale saying there won't be a tightening "anytime soon" and his colleague Miles remarking that there is "plenty of scope to encourage strong demand in the economy without driving inflation up." Cable is presenting sitting at 1.6688 bid after dipping to a low of 1.6671 following the GDP release. On the chart price action has turned flat, around 1.6650-6700, after reaching a major trend peak of 1.6822 on Feb-17. We're not too bullish as we see the Fed as remaining on its tapering course, while the BoE has expressed concern about the level of sterling.

    [USD, CHF]
    EUR-CHF continues to stick near to the 1.220 level. The recent break of support at 1.2206 (the Feb-13 low) and 1.2200 brought the Dec-17 cycle low of 1.2167 back into scope, the downside momentum has ebbed. SNB-speak this month reaffirmed the strong commitment to maintaining the 1.20 limit peg, and would only consider removing it if inflation was much higher (CPI has been steady at just 0.1% y/y over the last three months, and the outlook remains benign). We don't advise speculative accounts to hold long CHF exposures below 1.2100 given the threat of SNB intervention ahead of 1.2000.

    [USD, CAD]
    USD-CAD looks to be forming a potential double top formation, which is a classic reversal pattern. The pair's capping out just shy of 1.1200 last Friday left the late January major trend peak at 1.1224 unchallenged. There price action has been accompanied by a drop in upside momentum, and together point to a possible end of the bullish phase that was seen between October and January, implying potential for a sustained retracement or a period of stasis. Near-term support comes in at 1.1035, ahead of 1.1020-25 and 1.1000.

    Paste link in email or IM