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By XE Market Analysis January 14, 2014 7:42 am
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    XE Market Analysis: North America - Jan 14, 2014

    EUR-USD broke above its post-payrolls high and logged a 12-day peak of 1.3699 before settling around 1.3670-80 after some whippy price action. The pop higher was sparked by an optimistic prognosis of the Eurozone economy by ECB's Nowotny. We subsequently had a forecast-beating 1.8% m/m gain in Eurozone industrial production that sent the y/y rate to 3.0%, the highest since August 2011, though this didn't seem to have a great bearing on the euro. USD-JPY, meanwhile, rebounded to the 103.70 despite hefty stock market losses in Asia. Good demand was reported in EUR-JPY. Data showed that Japan's current-account deficit widened to a record in November on the back of higher imports. Elsewhere, the risk-off theme saw AUD-USD extend its correction from yesterday's 0.9086 one-month high, and the Aussie dipped under 0.9000. Sterling underperformed in the wake of U.K. inflation data, which revealed an unexpected CPI dip to 2.0% from 2.1%, its lowest since 2009.

    [EUR, USD]
    EUR-USD broke above its post-payrolls high and logged a 12-day peak of 1.3699 before settling around 1.3670-80 after some whippy price action. The pop higher was sparked by an optimistic prognosis of the Eurozone economy by ECB's Nowotny. We subsequently had a forecast-beating 1.8% m/m gain in Eurozone industrial production that sent the y/y rate to 3.0%, the highest since August 2011, though this didn't seem to have a great bearing on the euro. The EUR-USD outlook is now more bullish. The former dollar bullish view has been put on hold following the U.S. jobs report disappointment, which has capped a run of mostly firm Stateside data. EUR-USD has initial resistance is marked at 1.3700 ahead of 1.3758-60, support at 1.3650 and the recent low of 1.3637.

    [USD, JPY]
    USD-JPY rebounded to the 103.70 area despite hefty stock market losses in Asia. Good demand was reported in EUR-JPY. Data showed that Japan's current-account deficit widened to a record in November on the back of higher imports. In the bigger picture, we the BoJ's expansive monetary policy will continue to drive the yen to fresh lows during 2014. Data this month showed Japan's monetary base surged 46.6% y/y in December to a record Y193.5 tln, illustrating the impact that the BoJ's reflationary policy is having. The BoJ is targeting a monetary base to Y270 tln by the end of the year.

    [GBP, USD]
    Sterling dipped in the wake of U.K. inflation data, which revealed an unexpected CPI dip to 2.0% from 2.1%, its lowest since 2009 and rounding out what has been a largely unexpected 0.7 of a percentage point drop since September. Cable dipped nearly 50 pips to sub-1.6400 levels before finding a footing while EUR-GBP popped to a 0.8342 peak from around 0.8320. Today's report follows a run of real sector data and survey evidence that have shown that the economy hasn't been sustaining recovery momentum as well has had been thought. The data backdrop supports the BoE's ultra-easy policy stance. As for sterling, its six month rally now looks to have capped out and we see scope for a correction to 1.6000 in Cable..

    [USD, CHF]
    The CHF has seen some choppy price action in recent sessions, but overall we expect the currency to remain on a bigger-picture softer footing as a consequence of the unwinding in the Swiss currency's safe haven premium as the period of Fed policy uncertainty ended with its decision to commence QE tapering. Resistance comes in at 1.2400, support at 1.2320 and 1.2300.

    [USD, CAD]
    USD-CAD has broken sharply higher over the last week, partly driven by weaker Canadian data and the consequent underpinning of favourable yield differential movement. The pair broke 1.0700, 1.0800 and now 1.0900, taking out its Dec-20 major trend peak of 1.7337 on route. The price action marks a break higher after some pretty choppy price action over the last several of weeks. Resistance can now be expected at 1.0950 and 1.1000, support at 1.0800-1.0820.

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