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By XE Market Analysis December 10, 2014 3:33 am
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    XE Market Analysis: Europe - Dec 10, 2014

    The main currency pairings held within Tue ranges. Stock markets in Asia continued to fall amid concerns about the political situation in Greece and growth worries in China, while Fitch Ratings put Japan's sovereign ratings on Rating Watch Negative, citing high and rising government debt and increased uncertainty about the authorities' commitment to fiscal consolidation. USD-JPY drifted lower amid this backdrop, making an intraday low at 118.68, subsequently recovering above 119 after leaving yesterday's low at 118.59 unchallenged. EUR-USD oscillated between 1.2362 and 1.2397. Yesterday was the second day in a week that the euro had traded above 1.2400 but had failed to close above here. AUD-USD managed moderate net gains, lifting to a peak of 0.8338 but remaining well off yesterday's high at 0.8371.

    [EUR, USD]
    EUR-USD oscillated between 1.2362 and 1.2397. Yesterday was the second day in a week that the euro had traded above 1.2400 but had failed to close above here. Political concerns in Greece, and associated worries over its commitment to economic reform, should keep the euro a sell on rallies. We are also bearish on the view of diverging Eurozone and U.S. economic growth, and we look for an eventual make move on the July 2012 low at 1.2042. Resistance is marked at 1.2393-1.2400.

    [USD, JPY]
    USD-JPY made an intraday low at 118.68 in Tokyo trade, subsequently recovering above 119 after leaving yesterday's low at 118.59 unchallenged. Fitch Ratings put Japan's sovereign ratings on Rating Watch Negative (RWN), citing high and rising government debt and increased uncertainty about the authorities' commitment to fiscal consolidation. Fitch said that the RWN would be concluded during the first half of 2015. The move didn't have much impact on the yen as Moody's has recently cut Japan's sovereign rating. We expected the main to maintain a choppy range, supported on the one had by risk aversion, but undermined, on the other, by expectations that Abe will win this week's election, which would give yen-negative "Abenomics" policies a fresh mandate.

    [GBP, USD]
    We continue to class Cable as being in a bear trend, which has been persisting since the July cycle high at 1.7192, having made new trend lows on Friday and again on Monday. Resistance is at 1.5694-1.5700. The 1.5541 trend low marks support ahead of 1.5500, while the August 2013 low at 1.5102 should be in the crosshairs of bears.

    [USD, CHF]
    EUR-CHF has continued to ply a narrow range above 1.2020, giving the SNB a little space between spot levels and its rumoured buffer zone between 1.2010 and the 1.2000 franc cap. SNB's Zurbruegg recently pledged that the 1.2000 franc cap will be defended "with utmost determination" as the bank is prepared to buy an unlimited amount of FX and take further measures immediately if needed. According to more than 60% of respondents of a Bloomberg survey, the SNB will have to use negative interest rates to prevent the 1.2000 franc cap in EUR-CHF from being breached in the scenario that the ECB commences quantitative easing, while all but one are anticipating the SNB to step up interventions to defend the 1.2000 cap. Bloomberg also cited SNB member Zurbruegg clarifying that negative rates would have a bigger impact in Switzerland than has been the case in the Eurozone as permanent excess liquidity in the Swiss financial system exceeds 300 billion francs

    [USD, CAD]
    USD-CAD has settled in the upper 1.14s, just off the major-trend high at 1.1476, seen on Friday in the wake of the solid U.S. jobs report. We continue to anticipate a move on 1.1500, and above, with the CAD likely to trend lower on the back of soft oil prices. Support is marked at 1.1400-05.

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