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By XE Market Analysis December 21, 2017 2:09 pm
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    XE Market Analysis: Asia - Dec 21, 2017

    The dollar index pulled back from the 93.50 level at the N.Y. open, to a base of 93.26, in relatively light trade. In coming U.S. data weighed on the greenback to an extent, as Q3 GDP was revised slightly lower, and jobless claims rose more than expected. EUR-USD chopped around inside of 1.1850-80, while USD-JPY moved off its high of 113.57, bottoming at 113.35. USD-CAD fell sharply following solid retail sales and warmer CPI figures, basing at 1.2700. Cable recovered from 1.3332 lows, though was unable to reclaim the 1.3400 handle.

    [EUR, USD]
    EUR-USD chopped around inside of Wednesday's trading band, ranging between 1.1850 and 1.1880 through the session. We anticipate overall directional bias to shift to the down side in early 2018, assuming the temporary U.S. spending bill is passed and a government shutdown is avoided, following the success of the $1.5 tln tax bill. Passage of the tax overhaul, which will slash the corporate tax rate, among other things, has been widely anticipated, and is generally seen as a positive for the dollar in the bigger picture. The potential impact of the bill does not appear to have been priced into the dollar so far.

    [USD, JPY]
    USD-JPY has eased back from seven-session highs of 113.63, trading to 113.37 lows following the early U.S. data releases. The pairing has managed to print four-consecutive sessions of higher daily highs and lows, a positive development, while full-on BoJ stimulus should keep a floor under the pairing going forward. The BoJ left policy unchanged at its final policy meeting of the year, noting that the economy will continue its "moderate expansion," while governor Kuroda said that the central bank will remain committed to dovish policy settings.

    [GBP, USD]
    Cable ebbed to a two-day low of 1.3332 before recouping above 1.3375 after the London close. The pound traded softer versus the euro this week, but gained against the generally soft yen, lacking directional impetus in light year-end trading conditions. Looking to 2018, the Brexit negotiation process will continue to dominate the UK's agenda. The weak political position of the prime minister and her minority government will continue to be a font of uncertainty for investors and business leaders.

    [USD, CHF]
    EUR-CHF is up for a third successive day, logging a nearly three-year top of 1.1750. The cross has gained 9.3% on the year-to-date, which is slightly behind the gain the euro has seen versus the yen and short of the 12.9% gain that EUR-USD has seen, but is significant as is shows the biggest weakening the franc has seen versus the euro, and in trade-weighted terms, since the Eurozone crisis took hold back in 2010. The Eurozone's has seen political threats diminish this year, which along with a steady and assured pickup in growth momentum, have, along with -0.75% deposit rate, seen the franc unwind any vestiges it had of being a safe haven currency. Assuming the Eurozone has indeed 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 this month), we anticipate EUR-CHF will make an eventual return to 1.2000, which was the former floor the central bank maintained until January 2015.

    [USD, CAD]
    USD-CAD plunged from just over 1.2800 to 1.2720 lows following the warmer Canada CPI, and much stronger retail sales. The pairing has now traded under both its 20- and 50-day moving averages, with the latter, at 1.2749, now reverting to resistance. USD-CAD later printed 12-session lows of 1.2700.

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