Breaking News

USD/JPY Breaks 110, EUR Below 1.13: What’s Next?

By Kathy LienForexFeb 11, 2019 21:56
USD/JPY Breaks 110, EUR Below 1.13: What’s Next?
By Kathy Lien   |  Feb 11, 2019 21:56
Saved. See Saved Items.
This article has already been saved in your Saved Items

Daily FX Market Roundup February 11, 2019

By Kathy Lien, Managing Director of FX Strategy for BK Asset Management.

The US dollar is on fire. Investors drove the greenback higher against all of the major currencies in a move that took the euro, Japanese yen and Swiss franc to their lowest levels this year. USD/JPY is now trading comfortably above 110 and EUR/USD is well below 1.13. These important levels have limited the moves of both currencies for the past few weeks and the break on Monday paves the way for further euro and yen weakness. The lack of US data, relatively minor decline in equities and a general increase in global yields mean there was no specific catalyst for Monday’s moves. The only explanation is the return of liquidity in Asia as Chinese markets reopen for trading. While it's not apparent, there’s a lot to be worried about over the next few weeks. US-China trade talks continue, Theresa May will update Parliament on the progress she’s made in Brexit negotiations, funding for the US government runs out at the end of the week, the Reserve Bank of New Zealand meets Tuesday and the US Commerce department will be wrapping up its report on the need for car tariffs. Each of these events pose a significant downside risk to currencies but they could also lead to big short squeezes if the unexpected happens and they are resolved positively.

For USD/JPY in particular, the next stop should be the congestion zone between 111.25 and 111.70. Investors will be watching the showdown in Washington carefully after talks broke down over the weekend. The good news is that the talks have stalled due to disagreements over immigrant detention instead of funding for a border wall. Democrats and Republicans don’t want to repeat of the 35 day shutdown so there’s a reasonable chance for an agreement but the amount of funds for a physical border wall has not been agreed. A bill needs to be passed within the next 2, 3 days max for there to be enough time to pass the House and Senate. If an agreement cannot be reached, another temporary funding bill will be passed. Aside from what is happening in Washington, US data will also be in focus this week with CPI, retail sales, the Empire State and University of Michigan consumer sentiment surveys scheduled for release. If inflation and spending numbers miss expectations, they could cut short the dollar’s rally.

The selling pressure in EUR/USD is intense with the pair falling 7 out of the last 8 trading days. No economic reports were released from the Eurozone today but the softness in data is finally catching up to the currency. German yields rebounded after dropping below 0.1% last week but even with the uptick, the low level of yields is consistent with a weaker currency. The next level of support for EUR/USD is the November low of 1.1215 which should be tested quickly. For the time being, the path of least resistance for EUR/USD is lower unless the U.S. decides to forgo tariffs on European car imports. A move down to 1.10 is very likely. Meanwhile low liquidity triggered a flash crash in the Swiss Franc at the start of the Asian trading session and while the currency recovered its losses just as quickly, USD/CHF quiet trended higher during the NY session. Like many other parts of the world, inflationary pressures in Switzerland are easing.

The UK economy is slowing and the weakness is adding pressure on sterling. On Monday morning we learned that GDP growth fell short of expectations, the trade deficit narrowed less than expected and industrial production fell for the third straight month. Prime Minister May is set to present the progress that she has made to Parliament Tuesday and she could ask Parliament for more time. On Thursday, there will be a motion put forth for debate that would give MPs greater control of the Brexit process – none of this constitutes a vote but if May presents no meaningful updates and/or Parliament push to shift the process away from the government, sterling will find itself in even more trouble. All three commodity currencies also extended their losses as investors look forward to tough trade negotiations between the US and China.

USD/JPY Breaks 110, EUR Below 1.13: What’s Next?

Related Articles

USD/JPY Breaks 110, EUR Below 1.13: What’s Next?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email