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By XE Market Analysis February 27, 2014 7:10 am
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    XE Market Analysis: North America - Feb 27, 2014

    EUR-USD dropped to two-week lows under 1.3650 amid a broad bout of euro selling on news that the acting president of the Ukraine warned Russia not to consider military intervention in Crimea, which follows the U.S. warning to Moscow that such as course would be a "grave mistake." EUR-JPY shed over 100 pips in making a two-week low of 138.79 and EUR-CHF has logged a two-month low of 1.2157. An unexpected downward revision to Spanish GDP data also seemed to prompt euro selling, adding to pressure on the ECB to take further monetary action into its March policy meeting. The CHF and JPY outperformed, following their usual pattern during periods of risk aversion, while the AUD joined the EUR as an underperformer out of the main currency markets. USD-JPY fell below 102.00 for the first time in a week. Sterling was mixed, firming versus the EUR while trading softer against the USD. .

    [EUR, USD]
    EUR-USD dropped to two-week lows under 1.3650 amid a broad bout of euro selling on news that the acting president of the Ukraine warned Russia not to consider military intervention in Crimea, which follows the U.S. warning to Moscow that such as course would be a "grave mistake." The latest down-leg started yesterday following above-forecast U.S. housing data, though the current move reflects broader euro weakness on the Ukraine situation. EUR-JPY shed over 100 pips and made a two-week low of 138.79 and EUR-CHF has logged a two-month low of 1.2157. An unexpected downward revision to Spanish GDP data also seemed to prompt euro selling, adding to pressure on the ECB to take further monetary action into its March policy meeting. Technically, the EUR-USD picture has been looking bearish. A two-week run higher to last week's peak of 1.3773 stalled shy of 1.3800, and this follows multiple rejections from 1.38+ levels over the October to December period. Over this period there had also been a drop in upside momentum following a six-month rally phase. We target 1.3600 initially.

    [USD, JPY]
    USD-JPY fell below 102.00 for the first time in a week, reflecting yen outperformance as stock markets fell as risk-off took a grip on markets in response to the latest developments in the Ukraine. Bigger picture, there is little overall directional impetus in USD-JPY. BoJ policy would favour continued weakness, but the threat of China slowdown (and geopolitical tensions) and the negative consequences on global stock markets is an offsetting yen-supportive force. The 102.00 has no reverted as near-term resistance, ahead of 102.50 and last Friday's three-week peak at 102.83. Support is at 101.66 (the Feb-20 low), ahead of major support at 100.00-100.80, the latter of which is the 200-day moving average.

    [GBP, USD]
    Sterling has been mixed, firming versus the EUR while trading softer against the USD. On the Cable chart, price action has turned flat-to-lower after reaching a major trend peak of 1.6822 on Feb-17. We have been favouring a bearish view as we see the Fed as remaining on its tapering course while the BoE has expressed concern about the level of sterling, which seems to have been indirectly referenced by a bout of dovish BoE-speak over the last day. Support is marked at 1.6615 and 1.6600. Resistance is pegged at 1.6700.

    [USD, CHF]
    EUR-CHF fell to a 1.2157 low after breaking below the Dec-17 cycle low of 1.2167, taking the cross to its lowest levels since April last year. The Swiss currency is following its usual outperforming pattern during periods of risk aversion, this time with market confidence shaken by the unravelling Ukraine situation and associated concern of broader geopolitical tensions. 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.

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