Home > XE Currency Blog > XE Market Analysis: Europe - Dec 03, 2013

AD

XE Currency Blog

Topics6924 Posts6969
By XE Market Analysis December 3, 2013 2:40 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4848
    XE Market Analysis: Europe - Dec 03, 2013

    Weakness in both the JPY and the AUD against most other currencies provided the central theme among the main currencies today in pre-European Asian trade. The yen continued its across-the-board decent following yesterday's dovish talk by BoJ boss Kuroda, which were accompanied by "sources" cited by Reuters that the central bank has a contingency plan for more stimulus. USD-JPY logged a six-month high to 103.37, breaching a well-flagged notable option barrier level at 103.25 on route. EUR-JPY hit a new major-trend peak of 139.92. AUD-USD, meanwhile, fell to a three-month low of 0.9057 after the RBA said that, "a lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy." The backdrop of mostly lower equity markets in Asia was a further negative lead of the AUD. Elsewhere, EUR-USD was settled near its London closing levels of yesterday, at 1.3550 bid, just ahead of the London open today. Cable was similarly settled, consolidating after its run higher yesterday.

    [EUR, USD]
    EUR-USD was settled near its London closing levels of yesterday, at 1.3550 bid, just ahead of the London open today, having been pulled slightly higher from yesterday's a six-day low of 1.3529 by EUR-JPY, which made major-trend highs amid general yen weakness. EUR-JPY hit a new major-trend peak of 139.92, stalling shy of the major resistance level of 140.00. The 2008 peak of 141.72 looms above here as a big-picture target. The rekindled Fed tapering debate, following a run of encouraging data, will likely have an ironic negative affect on the USD, which tends to correlative negatively with stock market losses. This backdrop has provided some support to EUR-USD, though markets will be wary of pushing EUR-USD higher into Thursday's ECB meeting, where further non-conventional easing measures can be expected. So, following the repeated failure to sustain levels above 1.3600 over the last week, we would expect good range resistance into 1.3600 to prevail for now.

    [USD, JPY]
    The yen continued its across-the-board decent following yesterday's dovish talk by BoJ boss Kuroda, which were accompanied by "sources" cited by Reuters that the central bank has a contingency plan for more stimulus. USD-JPY logged a six-month high to 103.37, breaching a well-flagged notable option barrier level at 103.25 on route, with the next natural target falling to 103.50, which is also a barrier level. EUR-JPY hit a new major-trend peak of 139.92, stalling shy of the major resistance level of 140.00. The 2008 peak of 141.72 looms above here.

    [GBP, USD]
    Sterling has settled after a volatile day on Monday, which saw Cable log a two-year peak of 1.6443 before losing a big figure in dipping to 1.6343 amid a broader theme of USD buying. The pair finds itself around 1.6360 as trade commences in London today. EUR-GBP has also lifted from 11-month lows. The pound has rallied strongly over the last several weeks, which is fitting as the U.K. is currently the strongest growing economy out of the OECD grouping, but the market is settling now. There seems a reluctance to chase sterling higher at the moment, however, after Cable failed to extend to a fresh high following the much stronger than expected PMI report out of the U.K. on Monday. The PMI outcome wasn't such a surprise, in fact, as it had been portended to by last week's CBI industrial trends survey. We expect further sterling gains into 2014, however. The construction and services PMI reports later in the week should come in at strong readings, and we can expect an upbeat tone to Chancellor Osborne's presentation of the government's mid-fiscal year update, this Thursday. We have been targeting Cable to 1.6500..

    [USD, CHF]
    USD-CHF jumped higher amid a general bout of dollar buying on Monday, though we expect the pair to ebb now. The rekindling Fed tapering debate should prove supportive for the safe haven Swiss currency, as this backdrop should elicit risk aversion in global market. A three-week trend resistance line in USD-CHF came into play just above 0.9110 on Monday. We need to see a daily close below 0.9060 to confirm the bear trend. Last Friday's low at 0.9028 provides the initial target while trend support comes in at 0.8990. EUR-CHF looks biased toward its range lows seen over the last month in the 1.2280-1.2300 region. The highlight on the Swiss calendar this week is November CPI data, which we expect to tick back to a -0.1% y/y rate following the unexpected dip to -0.3% y/y in October. Continued cool inflation data, which is occurring despite the currency limit peg, will ensure that Swiss policymakers remain fully committed to ultra-easing monetary policy despite improving economic fundamentals.

    [USD, CAD]
    USD-CAD has settled after touching two-year highs of 1.0654 on Monday, but the pair has remained well bid. The October 2011 high of 1.0657 has posed a strong resistance, though heavy stops are seen above the level. The August 2010 peak at 1.6075 will offer another resistance level. The CAD has been on a much softer footing following soft inflation data, which should keep the BoC in full dovish mode when they announce policy on Wednesday.

    Paste link in email or IM