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By XE Market Analysis January 30, 2015 6:20 am
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    XE Market Analysis: North America - Jan 30, 2015

    The dollar came under broader pressure. EUR-USD worked higher, to the 1.1350 area despite a -0.6% y/y reading in Eurozone HICP in preliminary January data. A dip in Eurozone unemployment to 11.4% from 11.5% helped offset, while the market is also aware that the ECB's QE program, designed to eradicate deflation, doesn't commence until March. 'Grexit' concerns have come off the boil with the new Greek government pledging to look for common ground with the Troika. USD-JPY has ebbed toward the lower part of the range that's been seen over the last 10-days in dipping to the 117.50 area. Key support is marked by previous daily lows at 117.18-25. Japan's December CPI came in at 2.4% m/m, above the median forecast for 2.3%. AUD-USD found a toe-hold after clocking a trend of 0.7720 on Thursday, with was 21 pips shy of the July 2009 low. A Reuters poll today found 18 economists out of 25 are expecting the RBA on remain on hold at the Feb-3 policy review, with only seven expecting a cut. EUR-CHF has firmed above the 1.0382 high seen when the SNB abandoned the peg at 1.2000 on Jan-15, breaching above 1.0400.

    [EUR, USD]
    EUR-USD worked higher, to the 1.1350 area despite a -0.6% y/y reading in Eurozone HICP in preliminary January data. A dip in Eurozone unemployment to 11.4% from 11.5% helped offset, while the market is also away that the ECB's QE program, designed to eradicate deflation, doesn't commence until March. 'Grexit' concerns have come off the boil with the new Greek government pledging to look for common ground with the Troika. Bigger picture, we anticipate that EUR-USD has much further to go to adjust to the ECB's QE program, which commences in March and sharply contrasts the U.S. Fed policy, even if a tightening in the U.S. is looking more tentative. An eventual move on parity doesn't look out of the question, with the September 2003 low at 1.0762 providing an interim target.

    [USD, JPY]
    USD-JPY has ebbed toward the lower part of the range that's been seen over the last 10-days in dipping to the 117.50 area. Key support is marked by previous daily lows at 117.18-25. A breach here would bring the Jan-15 low at 115.85 into scope. Japan's December CPI came in at 2.4% m/m, above the median forecast for 2.3%, but ex-impact of the April 2014 sales tax hike, core inflation is just +0.5% y/y, the lowest since June of 2013. We expect USD-JPY will be biased higher in the bigger picture as 'Abenomics' policies remain alive and well in Japan. A Bloomberg survey last week found 26 of 33 of economists forecasting new BoJ monetary expansion by the end of October. The pronounced decline in EUR-JPY this week will have also strengthened the yen in trade-weighted terms, which is another factor that some analysts (including a research piece by Barclays this week) will also push the BoJ toward a new easing. USD-JPY support is at 117.25, resistance at 118.83-87 and 119.00.

    [GBP, USD]
    Cable has steadied following above-forecast UK consumer confidence data. Sterling had on Thursday dropped back under 1.5100 as the 10-year Gilt yield make a closing record low at 1.419%. The Gfk consumer confidence figure came in at +1 and -4, better than the -2 expected and reflective of the trending improvement of the UK labour market. This should add to the view that the BoE's next move will be a tightening, albeit in Q1 2016 as things stand at the moment. Since news of the sharp drop in UK CPI to 0.5% y/y, some BoE members, including Governor Carney, have emphasized that a fresh stimulus package is not on the cards. We have Cable support at 1.5018 and 1.4984-1.5000.

    [USD, CHF]
    EUR-CHF has firmed above the 1.0382 high seen when the SNB abandoned the peg at 1.2000 on Jan-15, breaching above 1.0400. The move reflects a generally firer euro this week, with 'Grexit' concerns having abated somewhat what (after peaking in the wake of the election) and with amid some mollifying data out of the Eurozone. The EUR-CHF market remains illiquid and whippy. SNB's Danthine on Tuesday said that the SNB was still "fundamentally prepared to intervene in the foreign exchange market," and that Singapore's SGD basket policy "deserved closer examination." He also confirmed that the prospect of ECB bond buying was seen as a key risk factor when deciding to abandon the franc cap. He still sees the franc as overvalued, but didn't mention what would be an appropriate level.

    [USD, CAD]
    USD-CAD clocked a new trend high at 1.2677 on Thursday, which was the eighth consecutive day that the pair has done so. Oil prices have remained soft over this period, and the market is continuing to adjust to last week's unexpected BoC rate cut, which the central bank said was "insurance" against downside risk to lower oil prices, which are "unambiguously negative" for the Canadian economy. Low oil prices are bad for the Canadian dollar as it erodes Canada's terms of trade, and some energy analysts are expecting NYMEX oil prices to trade below the 2009 NYMEX crude low at $40.68. USD-CAD's August 2009 high at 1.3063 provides a big-picture target.

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