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By XE Market Analysis January 30, 2014 3:10 pm
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    XE Market Analysis: North America - Jan 30, 2014

    The USD weakened against most currencies after the Fed cut monthly bond purchases by another $ 10 bln as expected. The move counterbalanced attempts in South Africa and Turkey to boost their currencies though rate hikes and rekindled save haven demand. The resulting rise in the Yen weighed on Japanese stock markets, which sold off as exporters headed south. The slowdown in Chinese manufacturing demand, as reflected in the HSBC PMI weighed on Australian and New Zealand dollars. The Pound meanwhile is lower against EUR and USD, while the Swiss Franc weakened and EUR/Dollar is trading quietly, after yesterday's drop. The U.S. calendar will reveal advance Q4 GDP, weekly jobless claims, and pending home sales data for December.

    [EUR, USD]
    EUR-USD eased back marginally with softer German state inflation data raising risk of softer national prices data, to be released later. The Eurozone fundamental picture is euro bearish, and ECB Draghi reaffirmed this week that interest rates will remain low or lower for an extended period, while the IMF reminded us that Eurozone inflation is "way below target". Cooler German inflation data however, would raise ECB cut expectations, weighing on the euro.

    [USD, JPY]
    USD-JPY did a good job holding the 102.00 handle overnight, and has made its way marginally higher into the N.Y. open. Risk taking remains uncertain, given the Fed taper and reeling emerging markets, so traders will be very tentative in taking on fresh positions in the near term. Market participants will likely wait and see how jitters in emerging market pan out.

    [GBP, USD]
    Sterling has remained choppy of late, with cable moving between 1.6450 and 1.6650 for a week now. Cable did find support into the bottom of the range in London, returning to 1.6500 into the N.Y. open. Good resistance is marked at 1.6650, levels above here saw strong selling interest last Friday. Overall, we are mildly bearish on sterling, though more so against the EUR, CHF and JPY than the USD for as long as the backdrop of risk-off persists.

    [USD, CHF]
    EUR-CHF slid lower through the session on Wednesday, as safe-haven CHF buying was steady. The cross fell to lows of the year near 1.2213. Traders will be hesitant to push too far under 1.2200, as the SNB will be paying close attention, and indeed, the pairing has recovered over 1.2230, with USD-CHF climbing back toward 0.9000, as U.S. equity futures indicate a higher Wall Street open.

    [USD, CAD]
    USD-CAD posted fresh trend highs of 1.1199 in London trade, though fell back under 1.1180 into the North American open, with defense of option barriers at 1.1200 noted. Stops are in place from 1.1210, and bigger picture, a dovish BoC may keep USD-CAD's trend upward sloping.

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