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By XE Market Analysis December 12, 2014 3:37 am
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    XE Market Analysis: Europe - Dec 12, 2014

    Relatively narrow ranges have prevailed among the main dollar pairings, which held comfortably within respective Thursday ranges. Liquidity was again reported to be on the low side due to the approach of year-end and ahead of the election in Japan at the weekend. USD-JPY gave up gains above 119.00 and settled in the mid-to-upper 118s. Polls suggest that PM Abe will win this weekend's election, which would give yen-negative "Abenomics" policies a fresh mandate. EUR-USD posted a 1.2384-1.2412 range, consolidating yesterday's losses, which had been driven by a firmer dollar in response to a firm set of data in the U.S.. AUD-USD saw choppy trade in the mid-to-upper 0.82s, holding above the four-year low made yesterday at 0.8215.

    [EUR, USD]
    EUR-USD posted a 1.2384-1.2412 range, consolidating yesterday's losses, which had been driven by a firmer dollar in response to a firm set of data in the U.S. We remain bearish on the view of diverging Eurozone and U.S. economic growth, with the ECB inching closer to implementing QE. We look for an eventual make move on the July 2012 low at 1.2042 and see recent gains as opportunity to establish a short position. Resistance is marked at 1.2495-1.2500.

    [USD, JPY]
    USD-JPY gave up gains above 119.00 and settled in the mid-to-upper 118s. We see that the overall bias for USD-JPY will remain to the upside. Polls suggest that PM Abe will win this weekend's election, which would give yen-negative "Abenomics" policies a fresh mandate.

    [GBP, USD]
    Cable clocked a two-week high at 1.5757 yesterday and has since settled lower. We continue to class Cable as being in a bear trend, which has been persisting since the July cycle high at 1.7192. Key resistance is marked at 1.5825-26. 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 been bumping along the 1.2010 level the upper level of the rumoured SNB buffer zone between here and the 1.2000 franc cap. The SNB kept the Libor target range unchanged at 0.00-0.25% at its policy review this week. SNB boss Jordan said that upward pressure on the franc has "intensified," and the central bank said it will enforce the cap with "utmost determination" and is prepared to take further steps if necessary. 'Further steps' may include negative interest rates, which SNB member Zurbruegg has recently argued would be an effective tool as permanent excess liquidity in the Swiss financial system exceeds 300 billion francs. A Bloomberg survey earlier this week found that more than 60% of respondents believe that the SNB will have to use negative interest rates to maintain the cap in the scenario that the ECB commences quantitative easing.

    [USD, CAD]
    USD-CAD logged new major-trend highs aabove 1.1500. We anticipate further advances, with the CAD likely to trend lower on the back of soft oil prices. Support is marked at 1.1500.

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