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By XE Market Analysis December 15, 2017 2:29 pm
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    XE Market Analysis: Asia - Dec 15, 2017

    The dollar headed broadly higher in N.Y. trade on Friday, largely buoyed by improved hopes that the U.S. congress would agree on a tax reform bill. Incoming data had little impact, as the Empire State index missed the mark a bit, while industrial production was as-expected. EUR-USD started at 1.1809 highs, later falling back to 1.1750 lows. USD-JPY bounced from 112.19 to 112.74. USD-CAD moved up over 125 points to 1.2882 high, with CAD selling stepping in following soft Canadian manufacturing data. Cable ended near three-week low, printing 1.3302 on ongoing Brexit fears.

    [EUR, USD]
    EUR-USD printed 1.1750 lows, moving further away from Thursday's 1.1862 high printed following the ECB's upgraded economic forecasts. The lack of guidance on the ECB's QE end-date has been a driver of euro weakness since then, while today's weakness has come from renewed hopes for a U.S. tax reform bill.

    [USD, JPY]
    USD-JPY recovered from eight session lows of 112.03, recovering to 112.74 highs, and back above its 20-day moving average of 112.34. Record high Wall Street levels, driven by renewed hopes that Congress will agree on a tax reform bill, has given the pairing a boost. Resistance now steps in at 112.87, the 50-day moving average.

    [GBP, USD]
    Sterling took a sharp turn lower, with cable has printing a near three-week low of 1.3302, well off the high posted Thursday at 1.3470. The losses come despite EU leaders earlier opening the way for negotiations on a post-Brexit trade deal to begin, which is looking like a tall order given the time frame at hand, with formal talks not set to begin until March. The solution would be for a multi-year transitory phase, something that both the British government and the EU are open to. A big cloud for investors and business leaders is the highly convoluted political setting in the UK, which is causing uncertainty about what Brexit will actually look like.

    [USD, CHF]
    EUR-CHF has seen volatile price action over the last couple of weeks, having turned lower after several attempts above 1.1700. There have been multiple failures to sustain gains above 1.1700 over the last month, and market participants will be wary of supply above this level. We still remain bullish over the medium term, however, with the SNB remains anchored to ultra-accommodative monetary policy, which looks likely to be the case for the foreseeable future.

    [USD, CAD]
    USD-CAD moved up from its opening 1.2757 low, getting support from softer Canadian manufacturing data, and a generally firmer Greenback. The pairing has since topped at 1.2876. In addition, some of CAD weakness appears to have come from growing concerns over the fate of NAFTA, and the impact on Canada's terms of trade. Trade uncertainty should keep the BoC sidelined until March, and will continue to support USD-CAD going forward.

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