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By XE Market Analysis November 13, 2017 1:49 pm
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    XE Market Analysis: Asia - Nov 13, 2017

    The dollar started the N.Y. week on a softer footing, though the DXY managed to edge slightly higher through the session. EUR-USD was capped under last week's 1.1677 top, before turning sideways near 1.1660. USD-JPY managed modest gains as Wall Street erased early losses. USD-CAD firmed over 1.2740 as oil price gains seen recently began to look a bit wobbly. Cable meanwhile, remained soft following reports that 40 Tory MPs are ready to sign a no-confidence letter, though recovered the 1.31 handle briefly.

    [EUR, USD]
    EUR-USD came up just short of Friday's one-week high of 1.1677, peaking at 1.1675 before easing back into 1.1660. The pairing continues to trade in a buy-the-dip mode, with the largest impediment for the dollar currently being the uncertainty over the U.S. tax reform process. A break over 1.1677 would result in the third straight session of higher daily highs, a bullish outcome, while a move over the 20-day moving average at 1.1686 would likely see the 1.1700 area targeted.

    [USD, JPY]
    USD-JPY perked up some, topping at 113.66 from session lows of 113.25. The pairing was back up flirting with its 20-day moving average of 113.56, largely as Wall Street turned opening losses into marginal gains. Generally though, the dollar remains susceptible to tax reform news, where the outcome remains uncertain as the House and Senate work their own versions of what reform should look like. Later, BoJ's Kuroda declared victory over deflation, saying "we judge that the economy is no longer in deflation, which is generally defined as a sustained decline in prices" but vowed to "continue to persist with powerful monetary easing to ensure that such positive inflation developments are not cut short." USD-JPY wiggled a bit under session highs with the headlines.

    [GBP, USD]
    Cable printed an eight-day low at 1.3061 in London morning trade, before recovering modestly to 1.3135 highs. Open dissention in the ranks of the government weighed on the pound today, as some 40 Tory MPs are ready to sign a no confidence vote against the prime minister, and there are concerns that the Brexit bill won't pass the upcoming parliamentary vote. This backdrop will likely overshadow the release of the UK's October inflation data tomorrow. Cable has been trading in the low 1.30s for over a month, but risks for a downside break are rising.

    [USD, CHF]
    EUR-CHF has been relatively settled over the last couple of weeks, trading on either side of the 1.1600 level. The 33-month peak seen in late October at 1.1712 has slipped off the radar screen for now, though, with the Eurozone gathering growth momentum, and seeming to have conquered political existential threats, we continue to anticipate an eventual return to 1.2000, which is the former trading floor of the SNB.

    [USD, CAD]
    USD-CAD crossed above its 20-day moving average of 1.2717, on its way to four session highs of 1.2741. Modest slippage in crude oil prices have provided some support, while bigger picture, traders will not likely be willing to go all in on long CAD positions given the uncertain BoC outlook. We look for a March rate hike from the Bank in March, though in the meantime, we are just a few weeks from what will almost certainly be a 25 basis point Fed hike. Last week's 1.2667 low provides the next support level, with resistance up at 1.2680-1.2700.

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