Technical Analysis: EUR/USD, GBP/USD, USD/JPY, and USD/CAD

EUR/USD

The euro gained the most in a month against the dollar after the Federal Reserve and five other central banks acted to make more funds available to lenders as Europe’s debt crisis threatens global economic growth. The dollar fell against all of its 16 most-traded peers and the yen declined as investors sought higher-yielding assets after the move was announced. China earlier lowered reserve requirements for banks for the first time since 2008.Australia’s dollar and South Africa’s rand climbed. “It’s been a major risk-positive move,” said Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York. “This addresses the funding issue, but if this was it, the market would become disillusioned quite quickly again. There’s going to need to be follow-up of a more substantial order.”The euro strengthened 0.9 percent to $1.3440 at 2:36 p.m. in New York. It touched $1.3533, the strongest level since Nov.22. The yen fell 0.3 percent to 104.07 per euro and rose 0.6 percent to 77.44 per dollar. The 17-nation currency gained as much as 1.6 percent, the biggest intraday jump since Oct. 27, when European leaders agreed to expand their rescue fund and reached an accord with lenders on 50 percent write downs for Greek debt. The six central banks agreed to reduce the interest rate on dollar liquidity swap lines and extend their authorization through Feb. 1, 2013. The rate was cut to the dollar overnight index swap rate plus 50 basis points, or half a percentage point, from 100 basis points, the Fed said in a statement in Washington. The Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank are part of the coordinated move, the Fed said. 




GBP/USD

The pound strengthened the most in seven weeks against the dollar after the Federal Reserve and five other central banks agreed to reduce the cost of emergency funding in the U.S. currency. Gilts fell, pushing 30-year yields up from record lows, after the central banks said they would lower the interest rate on dollar liquidity swaps lines by 50 basis points, damping demand for safer assets. U.K. government bonds rose earlier after Standard & Poor’s cut the ratings of some of the world’s biggest banks. The rate cut was “helpful for the pound against the dollar, although it will underperform the euro,” said Michael Derks, a market strategist at FoxPro Financial Services Ltd. in London. “It was not expected, but a very clever move and has already resulted in a sharp reduction in money-market rates.”The pound rose 0.9 percent to $1.5729 at 4:23 p.m. London time after increasing as much as 1.2 percent, the biggest gain since Oct. 12. Sterling appreciated 0.6 percent to 122.90 yen.The new interest rate is the dollar overnight index swap rate plus 50 basis points, a half percentage-point cut, and the program was extended by six months to Feb. 1, 2013, the Fed said in a statement in Washington. The Fed coordinated the move with the European Central Bank, Bank of Canada, Bank of England, Bank of Japan, and Swiss National Bank.   




USD/JPY

The yen was 0.4 percent from a one-month low against the dollar after euro-area finance ministers agreed to extend the capacity of the European Financial Stability Facility for indebted countries. Japan’s currency also weakened after Luxembourg Prime Minister Jean-Claude Juncker said yesterday the finance chiefs of the region’s 17 nations agreed to work on boosting the International Monetary Fund’s resources. The Dollar Index held a two-day decline before U.S. reports forecast to show improvements in employment and manufacturing. South Korea’s won extended a monthly loss against the greenback after the nation’s industrial output slipped in October. “Policy makers are taking various measures to contain the crisis,” said Kengo Suzuki, a foreign-exchange analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest bank by market value. “Optimism toward the finance-minister meeting in Europe is resulting in the selling of the yen.”The yen was little changed at 77.94 per dollar as of 6:55 a.m. London time from 77.93 in New York yesterday, when it slid   to as low as 78.29, the least since Nov. 2. It traded at 103.82 per euro from 103.77. The U.S. currency was at $1.3319 against the euro from $1.3317.Europe’s common currency has fallen 3.9 percent against the dollar and has declined 4.2 percent versus the yen this month. The dollar has gained 6.3 percent in the past month, the best performance among the 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The yen has risen 1.4 percent, the indexes show.  




USD/CAD

The Canadian currency rose the most since May 2010 as central banks including the Bank of Canada reduced the cost of emergency dollar funding to ease Europe’s sovereign-debt crisis, buoying riskier assets. The loonie , as the currency is known, advanced to a two-week high after a report showed Canada’s gross domestic product grew in the third quarter at a faster pace than economists forecast, spurred by the biggest jump in exports since 2004. The nation’s government bonds fell earlier after a private report showed companies in the U.S., Canada’s largest trading partner, added more workers in November than projected. “All the developments are building upon each other – you have China’s ratio cut, which was supportive of risk, you had lower swap rates, which was extremely supportive,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York. “You saw big spikes in commodity currencies. With data such as ADP and Canadian GDP a lot better than expected, that’s all good for risk.”The loonie appreciated 1.2 percent to C$1.0195 per U.S.  Dollar at 3:10 p.m. Toronto time. It gained more than 1.9 percent earlier, the biggest advance on an intraday basis since May 27, 2010. It touched C$1.0124, the strongest level since Nov. 14. One Canadian dollar buys 98.09 U.S. cents. Canada’s currency pared its monthly loss to 1.8 percent. If the Canadian dollar can close below C$1.02 per U.S. dollar, that will signal further strength for the currency, Gain’s Viloria said. The Bank of Canada joined the Federal Reserve, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank in coordinated action to reduce strains in markets and support the global financial system.