Loonie strong, Swissie weak on Eurozone worries

Daily forex winners and losers

The loonie is the top performing currency against the dollar with an advance of 0.27% in afternoon trade in New York. Strong risk appetite in pre-market trade quickly faded after the ECB’s Long Term Refinancing Operation or LTRO drew much stronger demand than expected with a total of 523 banks devouring nearly €490 billion in three-year loans at just 1.0%. Hopes of these institutions to purchase sovereign debt were fueled on Monday when ECB President Mario Draghi cited that although the central bank would not back-stop sovereigns, they would continue to ensure liquidity in the banking sector, that in turn could purchase sovereign debt. While the initial knee-jerk reaction saw risk assets outperform, broader market sentiment quickly shifted as the sheer size of the offer suggested that the European crisis may be worse off than anticipated.

Helping support the loonie are higher crude prices and retail sales data that topped estimates with a print of 1.0% month over month, well surpassing expectations for a read of just 0.5%. The USD/CAD continues to hold within the confines of a descending channel formation dating back to Dec. 15 with Interim support resting at 1.0270. A break here eyes subsequent floors at 1.0240 and the 23.6% Fibonacci extension taken from the Oct. 27 and Dec. 8 troughs at the 1.02-handle. Interim resistance stands at the 38.2% extension at 1.0295 followed by 1.0335 and the 50% extension at 1.0365. Our medium-term bias remains weighted to the topside as ongoing concerns regarding the deepening European crisis and a tax debate deadlock in Washington could fuel safe haven buying into the reserve currency.

Canadian dollar Key Levels

Level/Indicator

Level

100-Day SMA

1.0107

50-Day SMA

1.0209

20-Day SMA

1.0276

2011 CAD High

0.9406

The Swiss franc is the weakest performing currency against the greenback with a loss of more than 0.24% on the session. The franc has been on the offensive as of late after last week’s SNB rate decision cited no remarks about possibly lifting the EUR/CHF peg which currently stands at 1.20. Accordingly the swissie continued to advance as intervention concerns subsided.

The USD/CHF broke below channel support dating back to the Oct. 27 low with the pair rebounding off of the 23.6% Fibonacci extension taken from the Oct. 27 and Nov. 30 troughs at 0.9245 in overnight trade. Interim resistance stands at the 38.2% extension at 0.9355 with subsequent ceilings seen at the 0.94-figure, the 50% extension at 0.9445, and 0.9470. Interim support rests at 0.9320 backed by 0.9275, the 23.6% extension at 0.9245 and 0.9215. We remain neutral on this pair at these levels noting that a break above the 50% extension will likely shift our bias to the topside.

Swiss franc Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

0.8716

50-Day SMA

0.9077

20-Day SMA

0.9261

2011 CHF High

0.7079

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB: www.DailyFX.com

About the Author
Michael Boutros Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.
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