Forex headlines for February 19, 2014:
- FOMC minutes: Several officials wanted ‘clear presumption’ in favor of $10 billion cuts to bond buying at each meeting
- January US housing starts 0.880m vs 0.950m exp m/m
- US January PPI 1.2% y/y, as expected
- Canadian Dec wholesale trade sales -1.4% m/m vs -0.4% expected
- IMF sees new risks in very low European inflation
- Fed’s Bullard: The decline in the unemployment rate is real
- Fed’s Lockhart: Too early to draw conclusion on Q1 slowdown
- Fed’s Williams: Recent data has been somewhat disappointing
- Ukrainian President fires the army chief and replaces him with the head of the navy
- Gold down $12 to $1310
- WTI oil up $1.26 to $103.69
- S&P 500 down 12 points to 1829
- GBP leads, CAD lags
USD/CAD was the big mover in North American trading hours. The pair touched a one-month low of 1.0911 just as traders in New York and Toronto were coming in but it was like a rocket higher from there. The lows match the 50% retracement of the January rally and a soft wholesale sales number was all the ammunition traders needed to spark a 150 pip rally to as high as 1.1087. There weren’t any corrections along the way even as risk appetite wavered, the bounced and then sank at the end of the day.
EUR/USD was trending lower heading into US trading but the decline halted at 1.3739. One of the reasons was a soft US housing starts report. Naturally, weather takes the blame but if it turns out weather wasn’t the problem, it will be quite the reckoning. EUR/USD chopped up to 1.3765 but tensions in Ukraine led to a slip followed by a fall after the FOMC minutes held a hawkish tilt. The low was 1.3725, last at 1.3729.
Gold is entering the buy-zone near the 200-day moving average. Prices are sliding on profit taking and Fed hawkishness. A retest of the 200-dma (at $1302) is an enticing spot to start scaling into longs. Last at $1311.
On the flipside, oil continues to ramp higher after breaking out yesterday following 5 doji stars. The bullish momentum and seasonals are a double-dose of reasons to buy oil.
USD/JPY continues to disconnect from the risk trade. The puzzling thing about the pair was how it didn’t rebound even as the S&P 500 climbed higher. Sometimes that tells you that it’s on the precipice of the cliff and it will only take a bit of bad news to tip it over. That might eventually prove to be the case but the market wasn’t overly worried with the spill in stocks on Wednesday. USD/JPY finishes close to flat on the day.