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By XE Market Analysis December 20, 2017 4:07 pm
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    XE Market Analysis: Asia - Dec 20, 2017

    The dollar index fell to 12-session lows of 93.17 during the N.Y. session on Tuesday, before recovering marginally over 93.25 into the close. The greenback got little juice from the U.S. House passage of the tax reform bill, barely reacting to the news. EUR-USD topped at three-week highs of 1.1902, while USD-JPY remained relatively supported, aided by firmer U.S. Treasury yields. USD-CAD was pushed lower by stronger Canada wholesale data, while cable languished on either side of 1.3400. Holiday conditions should keep the FX markets choppy through year-end.

    [EUR, USD]
    EUR-USD rallied to levels last seen on December 1, topping at 1.1901 before heading back into 1.1875. Trade has reportedly been thin, with near year-end conditions keeping traders near the sidelines, and allowing for choppy market conditions. Long awaited passage of the tax reform bill should provide the greenback some support going forward, with general consensus being the FX market has not yet priced in the impact of the legislation.

    [USD, JPY]
    USD-JPY held above 113.10 earlier in the session, before printing 113.35, six-session highs. Higher Treasury yields continue to embolden dollar bulls, while technically, the breach over the 50-day moving average (now a support level) has opened up potential for further gains. Passage of the tax reform bill will likely provide a buying opportunity at current levels as well.

    [GBP, USD]
    Cable recovered to four session highs of 1.3420 in N.Y., though has sstruggled to hold the 1.34 handle since. Talks with the EU on a new post-Brexit trade deal will commence in March, but we expect the pound to remain mired in its historically weak range as the highly convoluted political situation in Britain looks set to continue to inspire uncertainty among investors and business leaders.

    [USD, CHF]
    EUR-CHF reclaimed the 1.17 handle, taking its cue from EUR-USD's rise to near December highs. The cross has seen choppy 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. Assuming the Eurozone has conquered existential political threats, and assuming the SNB remains anchored to ultra-accommodative monetary policy, which looks likely to be the case for the foreseeable (the central bank reaffirmed this commitment at its quarterly policy review last week), we anticipate EUR-CHF will make an eventual return to 1.2000.

    [USD, CAD]
    USD-CAD fell to session lows of 1.2819 from opening levels near 1.2870 following the strong Canada wholesale data. The pairing subsequently rallied to 1.2863 highs, though later pulled back under 1.2835 as WTI crude prices traded over the $58.00 mark. The pairing will likely consolidate going into Thursday's key Canada data reports where CPI and retail sales will be on tap.

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