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By XE Market Analysis January 15, 2014 6:43 am
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    XE Market Analysis: North America - Jan 15, 2014

    The USD extended yesterday's gains. USD-JPY logged a four-day peak of 104.47 during Tokyo trade, subsequently consolidating moderately lower during the European AM session. EUR-USD fell to a low of 1.3608 in London, a loss of almost 70 pips from yesterday's New York closing level and coming within about 30 pips of last Friday's pre-payrolls report low. AUD-USD also made a four-day low to 0.8887. There were no fresh developments of note, though China lending and money supply disappointed, which explained the Aussie's weakness today. The U.S. dollar maintained the bid established yesterday following firm U.S. ex-autos retail sales and solid inventory report that sparked upward revisions to Q4 GDP, helping offset last Friday's payrolls report disappointment.

    [EUR, USD]
    EUR-USD has traded lower after capping out at a two-week high of 1.3699 on Tuesday. The USD found support from Tuesday's U.S. data that showed strong retail sales (ex-autos) and solid inventory report that sparked upward revisions to Q4 GDP, which were backed up by hawkish remarks from Fed Plosser and Fisher. EUR-USD has seen choppy price action since last week's U.S. jobs report, which has muddied the nearer-term technical picture, though in the broader view we still think the pairing is making a topping formation. Initial support is marked at 1.3600. Resistance at 1.3668-1.3674, which encompasses both the 20- and 50-day moving averages.

    [USD, JPY]
    USD-JPY has consolidated Tokyo-session gains in Europe, holding around 104.20-40 after peaking at 104.47 earlier. Expiries of large vanilla options with strikes of 105.00 are reported to be rolling off at the New York cut today. The yen underperformed amid a strong USD and risk-on environment following yesterday's firm U.S. data and World Bank report that heralded that a "self-sustaining recovery" has commenced in advanced economies. We continue to expect that the BoJ's expansive monetary policy will continue to drive the currency to fresh lows during 2014. USD-JPY's major-trend peak is at 105.44, which we anticipate will fall in the coming weeks, if not sessions.

    [GBP, USD]
    Sterling's outlook is looking generally less bullish following CPI figures that showed inflationary pressures to be rapidly unwinding and 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. We still expect the pound to hold up against the likes of the yen, but to loose ground to the dollar. GBP-USD's six-month rally now looks to have capped out and we see scope for a correction to 1.6000. Initial resistance is marked at 1.6450.

    [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 1.1000, support at 1.0920-1.0900.

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