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By XE Market Analysis December 6, 2017 3:12 am
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    XE Market Analysis: Europe - Dec 06, 2017

    The yen has rallied amid a risk-off mood in global markets. A miss in Australian Q3 GDP, soft oil prices, tech sector woes, Brexit-related anxieties, and concerns about the lofty valuations of stock markets, have collectively been weighing on global equity markets, in turn pushing up safe havens, such as the Japanese currency and gold (and some say Bitcoin's run above $1200 is safe-haven driven). USD-JPY has plumbed four-session lows near 112.00, building on the decline from Monday's peak at 113.06. EUR-JPY and other yen crosses are also down. AUD-JPY, the forex market's best proxy of a risk appetite gauge, is showing the biggest move, with a 0.9% loss at present levels. Sterling is among the biggest losers as markets lose some of their recent faith that the UK and EU are near to finding an accord on divorce terms, with the Irish border remaining a key sticking point. Cable hit a five-session low of 1.3370. EUR-USD, meanwhile, has been plying a relatively narrow range in the lower 1.18s.

    [EUR, USD]
    EUR-USD has been plying a relatively narrow range in the lower 1.18s. The pair is trading near the midway point of the range that's been seen over the last three months. We anticipate that the broadly sideways chop will continue for now. Resistance is at 1.1905-10, and key support is at 1.1800.

    [USD, JPY]
    The yen has rallied amid a risk-off mood in global markets. A miss in Australian Q3 GDP, soft oil prices, tech sector woes, Brexit-related anxieties, and concerns about the lofty valuations of stock markets, have collectively been weighing on global equity markets, in turn pushing up safe havens, such as the Japanese currency and gold (and some say Bitcoin's run above $1200 is safe-haven driven). USD-JPY has plumbed four-session lows near 112.00, building on the decline from Monday's peak at 113.06. EUR-JPY and other yen crosses are also down. AUD-JPY, the forex market's best proxy of a risk appetite gauge, is showing the biggest move, with a 0.9% loss at present levels. USD-JPY has trend support at 111.78-80, and resistance at 112.37-40.

    [GBP, USD]
    Sterling is among the biggest losers as markets lose some of their recent faith that the UK and EU are near to finding an accord on divorce terms, with the Irish border, and a backlash against the proposed "regulatory alignment" deal, remaining a key sticking point. Cable hit a five-session low of 1.3370. As EU officials have been stressing, a deal on divorce terms has to be struck by the end of the week, ahead of the upcoming EU leaders' summit, if there is any chance that talks can move to a post-Brexit trade deal. The risks for sterling remains to the downside.

    [USD, CHF]
    EUR-CHF has seen volatile price action over the last several sessions, having on Friday turned sharply lower, to a low of 1.1599 after clocking a 35-month high of 1.1737, and subsequently, yesterday, lifting briefly back 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 remain bullish over the medium term, however. Assuming the Eurozone has conquered, or can conquer, existential political threats, and assuming the SNB remains anchored to ultra-accommodative monetary policy, which looks likely to be the case for the foreseeable, we anticipate EUR-CHF will make an eventual return to 1.2000. Support is at 1.1650.

    [USD, CAD]
    USD-CAD has lifted back to the 1.2700 level after yesterday clocking a six-week low of 1.2623, which capped a downward run that's been in play since last Friday's release of forecast-busting Canadian GDP and employment data. Softer oil prices and a broader risk-off mood in global markets has taken the draw out of the downward move in USD-CAD, which has in turn elicited some position trimming. USD-CAD has support at 1.2614-25, and resistance at 1.2717-18.

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