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By XE Market Analysis December 7, 2018 3:20 am
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    XE Market Analysis: Europe - Dec 07, 2018

    Currencies have been mixed in trade so far today. The Yen has seen some of its safe haven premium unwind, concomitantly with a steadying in global stock markets, although S&P 500 futures are showing a 0.5% loss while the Australian Dollar and other Dollar bloc currencies have drifted back towards lows. EUR-USD has settled to near the midday way of yesterday's range, around 1.1365-70, which is also roughly the midway point of the choppy range that's been unfolding over the last week and more. While the pronounced drop in U.S. yields and associated recalibration in Fed policy expectations has been a bearish force on the Dollar, the U.S. currency also found some demand of late as a safe haven currency. There has been offsetting declines in bund yields, which have ebbed to the lowest levels seen since April 2017. USD-JPY has lifted to the upper 112.00s after posting a six-week low at 112.23 during the late London PM yesterday. Trump cited a Beijing statement on Twitter, that "'We are full of confidence that an agreement can be reached within the next 90 days,'" adding "I agree," although Trump's overt attempts to bring China to heel, and the arrest of Huawei CFO on an alleged breach of Iran sanctions, suggests that Beijing will be unwilling for fear of weak. AUD-USD has drifted some 30 pips lower into the London interbank open, back towards yesterday's three-week low at 0.7192.

    [EUR, USD]
    EUR-USD has settled to near the midday way of yesterday's range, around 1.1365-70, which is also roughly the midway point of the choppy range that's been unfolding over the last week and more. While the pronounced drop in U.S. yields and associated recalibration in Fed policy expectations has been a bearish force on the Dollar, the U.S. currency also found some demand of late as a safe haven currency. There has been offsetting declines in bund yields, which have ebbed to the lowest levels seen since April 2017. This backdrop has netted out clear directional bias in EUR-USD. EUR-USD has been in a bear trend since April, although downside momentum has abated in recent weeks. We still take an overall bearish view of the pairing. The U.S. economy remains strong, which should be evidenced by today's release of the U.S. November payrolls report, where we expect a 215k rise in the headline, while the Eurosceptic populist movement gripping parts of the Eurozone, to which Italy's budget-planning woes and the Brexit mess are symptoms.

    [USD, JPY]
    USD-JPY has lifted to the upper 112.00s after posting a six-week low at 112.23 during the late London PM yesterday. EUR-JPY, AUD-JPY and other Yen crosses have seen a similar price action, which reflects a broad unwinding of safe-haven positioning following a late-session rebound on Wall Street and steadying in stock markets across Asia after yesterday's outsized losses. Trump cited a Beijing statement on Twitter, that "'We are full of confidence that an agreement can be reached within the next 90 days.' I agree," which helped to allay investor concerns of an entrenching trade war. USD-JPY has lifted back to near its 50-day moving average at 112.95. Support comes in at 112.49-50.

    [GBP, USD]
    The Pound has been holding steady as next Tuesday's House of Commons vote on the government's Brexit draws nearer, which has rendered the sterling market in a non-committal state given the breadth of possible scenarios that could unfold over the coming weeks. Cable yesterday lifted to, and subsequently settled in, the upper 1.2700s following a broader Dollar decline. Cable has support 1.2749-51, and resistance at 1.2802-05. The latter levels encompass the prevailing position of the 20-day moving average.

    [USD, CHF]
    EUR-CHF has ebbed back under 1.1300 after come choppy price action in recent sessions. The cross has support at 1.1260-61.

    [USD, CAD]
    USD-CAD has settled in the upper 1.3300s, consolidating recent gains which yesterday left an 18-monht high at 1.3445. The pair is set for its biggest weekly advance since June. The 30%-plus dive in oil prices over the last couple of months has consequences for Canada's terms of trade and, by association, the BoC policy outlook, with the central bank this week obliged to give dovish-leaning guidance. The BoC noted a "materially weaker" than expected energy sector and signs that trade conflicts are weighing more heavily on global demand. The central bank also said there "may be additional room for non-inflationary growth." A safe haven dynamic has also been buoying the U.S. currency, despite lower Treasury yields amid an ongoing recalibration of Fed policy expectations, where markets are now discounting a pause in the cycle following a hike this month. USD-CAD has support at 1.3340-43.

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