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27 Feb 2014
Flash: Risk-Off dominating the FX space - BMO
FXStreet (Guatemala) - Stephen Gallo, European Head of Currency Strategy at BMO Capital said, "Risk-off has dominated, as the broader market appeared preoccupied by the Ukrainian and Crimean situations".
Key Quotes
"‘Contagion threats’ have been apparent in FX, with long USD/PLN and short EUR/USD looking like a couple of the preferred trades as a result of this type of ‘risk off’."
"The EUR has tended to fall ahead of recent ECB rate decisions, particularly when Eurostat’s estimate for either core or headline CPI has disappointed to the downside. As a result, Germany’s CPI reading today and the ‘risk off’ situation described above both have the ability to trigger EUR/USD offers between 1.365-1.370 or lower, and these factors will be watched."
"‘Risk-off’ appears to have had no clear impact on USD/CAD yet, but it is worth nothing that today’s latest round of market tension has forced another failed attempt at 1.115 resistance (76.4% retracement of the 1.1225-1.0908 move). Today’s Q4 current account data from Canada are just a snapshot of one particular point in time, but an unexpectedly weak print here could see another test of the aforementioned resistance if ‘risk-off’ declines somewhat."
"We are expecting the pair to hold off from another test of 1.120 through tomorrow’s GDP data. Month-end and ‘risk-off’ should reduce the desire to add aggressively to the already ‘short CAD’ bias, and downside risks to the December GDP data should already be largely ‘in the price’. We still look for key support down in the 1.1025-1.105 range."
Key Quotes
"‘Contagion threats’ have been apparent in FX, with long USD/PLN and short EUR/USD looking like a couple of the preferred trades as a result of this type of ‘risk off’."
"The EUR has tended to fall ahead of recent ECB rate decisions, particularly when Eurostat’s estimate for either core or headline CPI has disappointed to the downside. As a result, Germany’s CPI reading today and the ‘risk off’ situation described above both have the ability to trigger EUR/USD offers between 1.365-1.370 or lower, and these factors will be watched."
"‘Risk-off’ appears to have had no clear impact on USD/CAD yet, but it is worth nothing that today’s latest round of market tension has forced another failed attempt at 1.115 resistance (76.4% retracement of the 1.1225-1.0908 move). Today’s Q4 current account data from Canada are just a snapshot of one particular point in time, but an unexpectedly weak print here could see another test of the aforementioned resistance if ‘risk-off’ declines somewhat."
"We are expecting the pair to hold off from another test of 1.120 through tomorrow’s GDP data. Month-end and ‘risk-off’ should reduce the desire to add aggressively to the already ‘short CAD’ bias, and downside risks to the December GDP data should already be largely ‘in the price’. We still look for key support down in the 1.1025-1.105 range."