Scots Say “No” To Independence, GBP Rallies
| Sep 19, 2014 05:20AM ET
Market Brief
The Scotland says “no” to independence, according to a comfortable majority of votes covered at the time we write these lines. The 307-year-old UK remains intact, pushing the GBP-complex higher across the board. GBP/USD opened above its 21-dma (1.6392) and rallied to 1.6525 before steadying. Trend and momentum indicators turn positive as the Cable has room to recover past weeks’ losses due to Scottish exit fears. The 200-dma (1.6691) is the next level at the radar. EUR/GBP hits a fresh two-year low at 0.78102. A critical support stands at 0.77552 (2012 low), before eyes shift towards levels pre-2008 crisis (0.65/0.75). Option related offers at 0.78-0.79 are likely to weigh further on EUR/GBP before the weekly closing bell.
In Japan, JPY crosses were solidly bid alongside with the Nikkei stocks (1.58%). GBP/JPY traded above 108.00 for the first time since October 2008, helping USD/JPY toward a fresh year high of 109.46. Japanese exporter offers and some profit taking are presumed at 109.50-110.00. Market begins to talk about a potential malaise regarding the strong weakness in yen. Wall Street Journal writes “falling yen is weaker tonic for Japan, currency’s slide brings doubts over costs”, while BoJ officials’ comment that the USD/JPY rise mostly due to monetary policy divergence. Nearing an important psychological level, a short-term bearish correction is seen underway. EUR/JPY crossed above the 200-dma (139.81) and rallied to 141.23 overnight. The pair is now trading at the overbought territories (RSI at 72%, 30d upper BB at 139.93). Offers are presumed at 142.30/50 (April 29 – May 8 resistance zone).
EUR/USD traded ranged in Asia as diverging forces - higher EUR/JPY and lower EUR/GBP – kept the levels steady above 1.2900. The EZ core—periphery spread tightened despite lower TLTRO lending yesterday (with banks taking up to 82.6 billion euros only!) as Scots “no” vote boosted the appetite in EZ peripheral bonds. The positive correlation between EUR/USD and long-maturity core-periphery spread kept the upside limited in EUR/USD topside attempts. Moving forward, TLTRO disappointment is positive for EUR/USD in the immediate future given that the ECB’s balance sheet expands slower-than-expected. Temporary EUR strength is seen as good opportunity to reinforce EUR-short positions.
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In Canada, the significant surplus in international securities transactions in July sent USD/CAD back below 1.1000. The pair rebounded from 1.0950 (21-dma & Fib 50% level on March-July drop). Canada will release the August inflation figures today and analysts expect some cool down in consumer prices on month to August, keeping the yearly inflation stable at 2.1% (slightly above the BoC’s target). Any positive surprise will place the BoC (claiming that the overheating in CPI is only temporary) under hawkish pressures. Solid support is building at 1.0950. Option barriers trail below 1.1000, stops are mixed above. We will be looking for further downside on USD/CAD for a daily close below 1.1000 (MACD pivot).
The economic calendar of the day: German August PPI m/m & y/y, French 2Q (Final) Wages, ECB July Current Account Balance, Canadian July Wholesale Trade Sales m/m, Canadian August CPI m/m & y/y, and US August Leading Index.
Currency Tech
EUR/USD
R 2: 1.3110
R 1: 1.3000
CURRENT: 1.2894
S 1: 1.2835
S 2: 1.2755
GBP/USD
R 2: 1.6644
R 1: 1.6525
CURRENT: 1.6442
S 1: 1.6340
S 2: 1.6280
USD/JPY
R 2: 110.00
R 1: 109.50
CURRENT: 109.16
S 1: 108.70
S 2: 107.40
USD/CHF
R 2: 0.9456
R 1: 0.9404
CURRENT: 0.9361
S 1: 0.9340
S 2: 0.9250
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