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By XE Market Analysis October 10, 2017 2:54 pm
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    XE Market Analysis: Asia - Oct 10, 2017

    The dollar was mostly lower in N.Y. trade on Tuesday, as risk-off conditions weighed. EUR-USD topped 1.1825 after the Catalonian president appeared to back down from declaring independence from Spain, instead "suspending" the result of the separatist vote to give time for dialogue with Madrid. USD-JPY slipped briefly under 112.00 on the nervous geopolitical backdrop, before recovering marginally. USD-CAD stayed heavy on either side of 1.2500 as oil prices recovered, while cable found a footing over the 1.3200 mark.

    [EUR, USD]
    EUR-USD remained near session highs of 1.1818, holding its bid tone, as Catalonian leader sounded a conciliatory tone in a speech to the regional parliament. The constitutional crisis is likely far from over however, with euro impact still a decent possibility. EUR-USD dipped to 1.1796 from 1.1810 as the Catalonian leader said the current relationship with Spain is unsustainable. From there, the euro jumped to intra day highs of 1.1825 as Puigdemont said he would suspend a declaration of independence in order to pursue dialogue with Madrid. The 20-day moving average at 1.1835, and the 50-day moving average at 1.1845 provide the next resistance levels, while last week's near 2-month low of 1.1670 remains as support.

    [USD, JPY]
    USD-JPY printed 111.99, a better than two-week low, before bouncing slightly. The pairing traded briefly under its 20-day moving average at 112.09, finding support above the 200-day moving average at 111.88. While Wall Street remains higher, the risk backdrop has been a weight on USD-JPY this morning, with N. Korea, Turkey, and Spain/Catalonia issues supporting the yen.

    [GBP, USD]
    Cable settled over 1.3200, which extended the recovery from Friday's one-month low at 1.3027. The pound last week posted its biggest weekly decline since August 2016. Helping foster the turn higher was the ONS stats office disclosing of an error that caused an underestimation of companies' costs data, which has given the BoE rate hike case a boost. We still prefer selling into sterling strength in the case against the dollar. Support is at 1.3175.

    [USD, CHF]
    EUR-CHF has lifted back above 1.1500, logging a two-week high at 1.1515. The move reflects a broader bid in the euro, with markets evidently not expecting the Catalans to unilaterally declare independence at this stage (Catalan President Puigdemont is set to address lawmakers in Barcelona today). Former EUR-CHF resistance at 1.1488-90 and 1.1500 now revert as supports. We still expect the franc trade on a generally softer path versus the dollar, and other currencies. The SNB stated at its quarterly policy review last month that the Swiss franc "remains highly valued," even in light of the relatively sharp weakening the currency saw from late July.

    [USD, CAD]
    USD-CAD took its cue from WTI crude prices, which continued to advance, trading at session highs over $51.00. The pairing has dipped to 1.2484 lows, coming from overnight highs of 1.2555. Further downside is likely to be limited going forward, as the market has largely re-evaluated the BoC policy outlook, where additional rate hikes are expected to be delayed. The 50-day moving average, currently at 1.2465 provides the next support level.

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