Currency markets are mixed

Euro steady, sterling rises

The US dollar mostly retreated overnight as Fed rate hike expectations were pared for March and investors hoped for progress in the Ukraine-Russia meeting expected today. The dollar index eased slightly by 0.04% to 97.36, but with oil prices on fire in Asia today has resumed its ascent, climbing 0.16% to 97.51. Its short-term direction continues to be at the mercy of Ukraine developments although I note that whispers of positive news have not severely dented US dollar strength.

EUR/USD remains anchored around support at 1.1100 today, despite spiking lower to 1.1050 in the overnight session. There appears to have been large EUR/GBP selling flows that went through the market as GBP/USD rallied to 1.3400, where it remains today. As long as EUR/USD clings to 1.1100, there is still potential for a decent short-squeeze. Long-term support is at 1.0800.

AUD, NZD and CAD all rallied strongly as global sentiment took a tentative step higher, with CAD’s rally aided by a 0.25% hike by the Bank of Canada. AUD/USD and NZD/USD are nearing resistance at 0.7300 and 0.6800 respectively, while USD/CAD is flirting with support at 1.2830. Positive developments from Eastern Europe could spark a potentially aggressive rally by all three sentiment indicators, but I would prefer to wait for absolute confirmation.

Asian currencies also staged modest rallies overnight, but the continuing rise in oil prices will cap gains in most regional currencies.  USD/CNH and USD/CNY remain anchored between 6.3100 and 6.3200 as basket component currencies elsewhere remain weak. Yuan strength will likely only weaken if the PBOC decides up to raise the counter-cyclical factor at the fixing.

With most international transactions for energy and commodities being priced in US dollars, demand for greenbacks from the real economy should remain robust, softening any short-term retreats.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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