EUR/USD fighting an uphill battle

KBC Market Research Desk KBC Bank

Bonds and equities traded indecisively yesterday. Investors pondered incoming news on corona after China applied a new methodology of reporting. Still, the euro downtrend remained firmly in place. The EMU economy already suffered ‘pre-corona’ and last year’s evidence showed EMU is vulnerable to disruptions in supply chains from China. Technical factors were also in play. EUR/USD, EUR/JPY and EUR/GBP more or less simultaneously dropped below technically relevant levels, reinforcing a stop-loss repositioning. The euro even struggles against some smaller currencies (PLN, NOK, HUF….). EUR/USD closed at 1.0841 (from 1.0874). USD/JPY closed at 109.82, still within reach of the 110 handle.

This morning, Asian equities are mostly trading higher with Japan underperforming. US equity futures try to resume their uptrend after yesterday’s pause. The yuan eases marginally but USD/CNY is holding below the 7.00 reference. USD/JPY stabilizes in the 108.80 area. EUR/USD remains under pressure (1.0835 area).
EMU growth to be published later today (expected at a meagre 0.1% Q/Q) is a bit outdated. Still, any negative surprise or poor details could raise further questions on the health of the economy already before corona and on the ECB’s reaction, with the risk of further negative implications on the euro. In the US, retail sales, industrial production and Michigan consumer confidence will be published. We keep an eye at the retail/consumer data after a loss of momentum in Q4 consumer spending. However, US data probably have to be quite weak to break the USD bid and to change fortunes for EUR/USD.

The EUR/USD technical picture deteriorated substantially after breaking subsequent supports, including the 1.0879 2019 low. 1.0778 is next reference (2017 gap). A sustained rebound above 1.0879/1.0925 would be first tentative sign that pressure might be easing.

Yesterday, UK political turmoil turned out to be supportive for UK yields and for sterling. Fin Min Javid resigned after a dispute with PM Johnson. His successor Rishi Sunak is seen as more open to a less strict budgetary approach. Sterling extended gains after the reshuffle. Euro weakness accelerated the EUR/GBP decline to the 0.83 area. The post-election low (0.8277) is on the radar. There are no UK eco data today. Further euro weakness still might cause a retest of correction low.

Download The Full Sunrise Market Commentary Currencies

Author

KBC Market Research Desk

KBC Bank

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.