XE Market Analysis: Europe - Jan 23, 2015 EUR softness, USD firmness continued to be the main theme in forex markets following the ECBs bigger-then-expected quant easing announcement yesterday. EUR-USD clocked an 11-year low of 1.1314 during Asian trade, with rebounds remaining absent. EUR-JPY breached the Oct-16 low on route to making a 26-month low at 133.94. USD-JPY, meanwhile, posted a two-day high at 118.81 in early Tokyo trade before settling to a consolidation centred around the 118.50 mark. AUD-USD remained under pressure amid expectations that recent central bank easings (ECB, BoC, SNB, among others) will force the RBA, well known for its view that the AUD is overvalued, into an easing at its Feb-3 policy review. Stops were breached through 0.800 and a low was left at 0.7964, the lowest level seen since July 2009. In news, Saudi King Abdullah died, leaving succession and stability questions, which have seen oil prices gain nearly 2%. In data, Chinas HSBC/Markit flash Jan manufacturing PMI came in at 49.8 (expected 49.5), and Japans equivalent was 52.1. [EUR, USD] The euro has remained, and is expected to remain under blanket pressure following the ECBs bigger-then-expected, EUR 60 bln per month, quant easing announcement yesterday. EUR-USD clocked an 11-year low of 1.1314 during Asian trade, with rebounds remaining absent. EUR-JPY breached the Oct-16 low on route to making a 26-month low at 133.94. We anticipate that EUR-USD has much further to go to adjust to the ECBs QE program, which commences in March and sharply contrast to U.S. Fed policy. An eventual move on parity doesnt look out of the question, with the September 2003 low at 1.0762 providing an interim big-picture target. The Jan-16 low at 1.1460 well mark as key resistance, and 1.1300-14 as near-term support. [USD, JPY] USD-JPY posted a two-day high at 118.81 in early Tokyo trade before settling to a consolidation centred around the 118.50 mark. EUR-JPY, in contrast, headed lower amid general euro underperformance, breaching its Oct-16 low on route to making a 26-month low at 133.94. We expect USD-JPY to remain biased higher in the bigger picture as Abenomics policies remain alive and well in Japan. A Bloomberg survey this week found 26 of 33 of economists forecasting new BoJ monetary expansion by the end of October. USD-JPY support is at 117.80-118.00 , resistance at 118.83-87 and 119.00. [GBP, USD] Cable has been trading heavily in the wake of the ECB announcement, with pressure on EUR-USD affecting, especially after this weeks MPC minutes this week unexpected revelation that the two former BoE MPC hawks had turned neutral. We remain bearish, albeit somewhat tentatively than before given the trending improvement in the UK labour market and signals from BoE members that a fresh stimulus package is not on the cards despite the recent sharp drop in inflation. Cable breached 1.5000 for the first time since July 2013, on route to making a low at 1.4972. The low from that month at 1.4813 provides a target. In contrast, sterling should remain supported against the euro. [USD, CHF] EUR-CHF continues to ply a choppy centred on 1.0 after the SNB unexpectedly abandoned the franc cap on Jan-15. Swiss economy minister Schneider-Ammann said this week that uncertainty over franc rate may last for months. Lots of downward Swiss growth forecasts came as a consequence of the near 20% appreciation of the franc. UBS led the way in slashing their 2015 forecast to 0.5% y/y from 1.8% y/y, and to 1.1% y/y from 1.7% for 2016, saying that watch exporters will be most affect by the surge in the francs surge. S&P Ratings said, however, that while exports will be impacted, Switzerlands strong economy and solid public finances will resist this exchange rate shock, and that its ratings of Swiss sovereign debt are unaffected. The SNB argued that while the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate, and that the economy is able to take advantage of this phase to adjust to the new situation. [USD, CAD] USD-CAD clocked a new trend high at 1.2419 on Thursday and bounces have remained shallow in the interim following this weeks 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 Canadas terms of trade, and some energy analysts are expecting NYMEX oil prices to trade another 10% lower before basing, which would see the 2009 low in NYMEX crude at $40.68 breached. USD-CADs August 2009 high at 1.3063 provides a big-picture target.
Posted on: Fri, 23 Jan 2015 10:30:44 +0000
Recently Viewed Topics
© 2015