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By XE Market Analysis January 12, 2015 6:51 am
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    XE Market Analysis: North America - Jan 12, 2015

    The dollar rebounded from Asia session weakness. EUR-USD dove back under 1.1800 after carving out a five-day high at 1.1871 in Asia. News that a broad majority at ECB are in favour of sovereign bond purchases, according to a report in Germany's Handelsblatt, presented the market with a cue to sell EUR-USD. USD-JPY, meanwhile, rebounded from a six-day low at 118.09 and recouped the 119.00 amid general dollar firmness, and other pairings have seen similar price actions.

    [EUR, USD]
    EUR-USD dove back under 1.1800 after carving out a five-day high at 1.1871 in Asia. News that a broad majority at ECB are in favour of sovereign bond purchases, according to a report in Germany's Handelsblatt, presented the market with a cue to sell EUR-USD. We remain bearish as markets continue to factor in an ECB announcement of a QE program at the Jan-22 policy meeting, with the central bank's concerns about deflation outweighing the recent improvement in survey data. EUR-USD resistance is marked at 1.1800 and 1.1846-50, support 1.1780.

    [USD, JPY]
    USD-JPY rebounded from a six-day low at 118.09 and recouped the 119.00 amid general dollar firmness. Bigger picture, USD-JPY has been trending broadly sideways since making a seven-year peak at 121.85 on Dec-8. We remain bullish, however, with 'Abenomics' policies likely to maintain the dollar's yield advantage over the yen, even if Fed tightening prospects remain tentative. USD-JPY resistance is marked by former range lows at 119.96-120.09, and support is marked at 1.1800-05.

    [GBP, USD]
    Cable found a footing around 1.5100 after dipping quite sharply during the early part of the London session. A high of 1.5193 had been seen in the early Asia-Pacific session. News that UK pharmaceutical company Shire is buying U.S. NPS Pharmaceuticals for $5.2bln has weighed on Cable. Bigger picture, sterling remains in the grip of a bear trend that's been persisting since July last year. A test of 1.5000 looks just a matter of time, reportedly a big option level with large sell-orders below. The sharp drop in the UK December composite PMI, which at 55.4 is the lowest since May 2013, along with a CPI rate of 1.0%, will have strengthened the dovish voices at the BoE's Monetary Policy Committee. Cable resistance is at 1.5193-1.5200, support at 1.5034-5.

    [USD, CHF]
    EUR-CHF has come under fresh pressure in recent days, once again amid general euro weakness. Swiss foreign currency reserves data for December last week showed reserves rose to CHF 495.1 bln (a record) from CHF 462.7 bln in November, which is a consequence of the SNB's intervention on Dec-18. The intervention was additional to the implementation of a negative deposit rate, which was cut to -0.25%, also on Dec-18. The rouble crisis and euro weakness saw EUR-CHF come under pressure in December, and on Dec-16 the cross came within six pips of SNB's the 1.2000 limit. The cross spiked to 1.2096 on Dec-18 on the intervention, along with the announcement of the negative deposit rate. This was the first time that the SNB has intervened in spot since 2012. With the ECB set to pursue QE, the SNB will have its work cut out to defend 1.2000 during the first half of 2015.

    [USD, CAD]
    USD-CAD is consolidating after the pair punched out a new trend high at 1.1874 on Wednesday when oil prices clocked a new five-year low below $48. Low oil prices are blighting Canada's terms of trade. The August 2009 high at 1.3063 provides a big-picture target.

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