Market Analysis: W/E Feb 12, 2016

The dollar clawed back some of its losses in N.Y. on Friday, and was helped early on by better than expected retail sales data. Consumer sentiment missed the mark slightly, which offset some, though as oil prices soared, and Wall Street advanced sharply, the greenback largely held its own. EUR-USD peaked at 1.1278 into the data, and later made its way to 1.1215 lows. The improved risk backdrop allowed USD-JPY to rally from 112.59 to highs over 113.40. USD-CAD meanwhile, fell to 1.3814 lows, from 1.3965 as WTI crude rallied as much as 12%, to over $29.50. Cable fell briefly under 1.4450, though staged a recovery after the London close, peaking over 1.4500.

EUR-USD gave back some of Thursday’s gains, falling from 1.1278 highs ahead of the early U.S. data, before touching 1.1215 lows into the London close. Yellen’s voicing concern over the strength of the dollar on Thursday, and Fed fund futures pricing the next rate hike in early 2018, put pressure on the greenback, though ahead of Draghi-speak, and a U.S. holiday on Monday, some position squaring was evident today.

USD-JPY managed to reclaim the 113 handle again, peaking near 113.50 after the London close, after topping at 113.16 immediately following the 8:30 EST U.S. data releases. Firmed up yields, and the return of some risk taking provided support today, while short covering ahead of what will be a North American three-day weekend kept a floor under the pairing.

Sterling slumped back into the London close before recovering modestly in N.Y. afternoon trade. The pullback tallied with the erosion in EUR-USD, which was helped along by post-U.S. data dollar gains, while EUR-GBP has modestly lifted from the earlier two-day low at 0.7745. The pound yesterday clocked a 13-month low versus the euro, and a 27-month low against the yen. The quid has been trading generally soft in trade-weighted terms since early December, though has lately fared better against some of the underperforming commodity currencies.

EUR-CHF rallied to 1.1043 highs on Thursday, aided by a broadly firmer euro, though gave back its efforts on Friday, as EUR-USD moved back to the low 1.12’s. The franc’s pronounced weakness over the last month also reflects the success that Swiss policymakers have had in dismantling the franc’s safe haven credentials. SNB policymakers have been quite vocal since the start of the new year in emphasizing their desire for a weaker franc, while -0.75% interest rates has been doing the trick in terms of feeding yield-seeking capital outflows.

USD-CAD retreated to 1.3814 lows, weighed on heavily by the huge surge in oil prices. The pairing closed under the 50-day moving average, currently at 1.3869, on Thursday, and ran into sellers earlier just ahead of the level early in the session. Initial support is Tuesday’s base of 1.3787.


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Charles Clifton Forex Trader 02