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By XE Market Analysis December 12, 2017 3:23 pm
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    XE Market Analysis: Asia - Dec 12, 2017

    The dollar rallied in N.Y. trade on Tuesday, as warmer U.S. PPI, and softer European data supported. In addition, the greenback was bid up into Wednesday's FOMC meeting, where a 25 basis point rate hike is widely expected. Given a hike has been priced in, risk for the dollar appears to be a sell-the-fact sell-off. EUR-USD opened at 1.1765 highs, later making its way to a low of 1.1718. USD-JPY meanwhile, topped at 113.75, though gave back some ground into the close. USD-CAD was bid up as oil prices moved lower, while cable gave back post U.K. CPI gains, falling to just above the 1.3300 mark.

    [EUR, USD]
    EUR-USD fell to 1.1718 lows, a nearly one-month base, coming from opening highs over 1.1765. A sub-forecast ZEW business confidence survey out of Germany got the ball rolling in Europe, while warmer U.S. PPI data kept sellers emboldened. Markets have priced in a Fed hike on Wednesday, though will be sensitive to the Fed's updated economic projections and forward guidance. With the labor market tightening, we expect the Fed will affirm that another hike is in the works as soon as March.

    [USD, JPY]
    USD-JPY continued its rally, topping at 113.75, and posting four consecutive sessions of higher daily highs in the process. Improved risk taking levels provided support, while broad dollar buying was a feature today into Wednesday's likely Fed rate hike. A case of sell-the-fact may be in play after the FOMC, with a 25 bp rise largely priced in. The pairing blipped lower to113.37 following a tweet from GOP Senator Paul, who said he would not vote for a spending bill that blew out the deficit. The dollar quickly recovered from those lows

    [GBP, USD]
    Sterling more than reversed post-CPI gains, with Cable tumbling to a 1.3303 low from a post-data high at 1.3380. Brexit-related uncertainty still prevails, despite last week's breakthrough on divorce terms, as we're still non-the-wiser as to what Brexit will look like -- whether a hard exit or a soft exit. We take a bearish view of Cable. Support is at 1.3300-10, and resistance at 1.3351-52.

    [USD, CHF]
    EUR-CHF fell to eight session lows of 1.1625, with losses coming as the euro generally traded lower. The cross has seen volatile price action over the last week or two, with multiple failures to sustain gains above 1.1700 over the last month, and market participants will be wary of supply above this level. We remain bullish over the medium term, however. Assuming the Eurozone has conquered, or can conquer, existential political threats, and assuming the SNB remains anchored to ultra-accommodative monetary policy, which looks likely to be the case for the foreseeable, we anticipate EUR-CHF will make an eventual return to 1.2000.

    [USD, CAD]
    USD-CAD rallied to 1.2892 highs, taking its cue from a recent downdraft in WTI crude prices, and a generally buoyant greenback. This was the highest since the December 1 top of 1.2902. USD buyers took the lead this morning, into what will most likely be a 25 basis point Fed rate hike on Wednesday. Meanwhile, WTI crude, which topped over $58.50 early on, fell back to $57.03 lows on reported profit taking. USD-CAD had topped between 1.2870-80 for the past three sessions, though a close above will likely bring the November 30 high of 1.2909 into focus.

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