Jason Alan Jankovsky Morning Currency Briefing Feb 5th
The USD extended gains overnight as risk aversion continued through the global financial markets topping at around seven-month highs against most pairs; Asian action was dominated by the CHF crosses as rumors of SNB intervention again added volatility to the majors.
Although the SNB refused to comment on possible intervention EURO/CHF whipsawed more than two full handles during the session spilling over to USD/CHF lifting that pair through tech resistance to score new highs before settling down firmly around the 1.0700 handle. Equities fell across the board posting new two-month lows in most Asian & European bourses; traders note that spillover from Thursday’s DJIA close was exacerbated by a widening in the Greek-German bond spread. Many analysts are suggesting that today’s US NFP data will have a calming effect as most are looking for a slight rise in the number giving investors a reason to buy the dip in stocks; a poor number may already be factored into prices as well suggesting that the move lower was likely overdone and a recovery will be the end result today putting pressure on the Greenback off current highs.
GBP extended lows for the week for a low print at 1.5651 before regaining the 1.5700 handle; high prints at 1.5778 in early Asia with traders noting sovereign demand off the lows suggesting the rate is trying to bottom. EURO had a similar overnight session dropping through the 1.3700 handle for low prints at 1.3646 where sovereign and semi-official demand was seen; the rate is back on the 1.3700 handle in early New York and may challenge high prints at 1.3748 during the day. Traders note that sovereign interest has been seen for the past few days in Asia at the lows suggesting that CB’s are selling USD and putting more EURO in their reserves.
USD/JPY is slightly higher stabilizing off the wicked volatility seen yesterday, low prints at 88.88 with highs marked at 89.78; traders note that sovereign demand for USD was seen also suggesting that the sharp break may have been overdone a bit but volatility remains high into New York. USD/CHF rallied as the CHF crosses blew up overnight, high prints at 1.0798 went offer quickly and the rate is holding around 1.0720/30 area with no follow-on buying after the rumors were done. Low prints at 1.0645 may be challenged if equities post a rally today as intervention is usually unsuccessful longer-term.
USD/CAD lifted to a high print at 1.0783 before offers capped; traders note that the rate has reached a technical objective for the bulls and the rate is under pressure to start New York holding around the breakout level of 1.0720/30; low prints at 1.0715 in early New York with tech support around 1.0660 area for the day. In my view, the move higher in the USD was largely a knee-jerk reaction to fear that the global financial recovery was under threat. As investors move out of panic selling of asset classes the USD will begin to pullback and resume the broader downtrend.
A correction higher against the bearishness seen last year was expected and welcome by traders and cooler heads likely will prevail; I think professional traders are looking to sell the USD rally at some point and if that point is the day NFP marks a gain (?) then the USD should be lower end of day.
Jason Alan Jankovsky
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