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By XE Market Analysis December 14, 2018 3:29 am
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    XE Market Analysis: Europe - Dec 14, 2018

    The Dollar and Yen has traded firmer against most other currencies against a backdrop of souring risk appetite after Chinese retail sales and production data undershot growth expectations, which in rekindled concerns about flagging global growth. The biggest losers out of the main currency group has been the Dollar bloc currencies, with AUD-USD and AUD-JPY down 0.7% a piece, and NZD-USD off by 0.9% heading into the London interbank open. AUD-USD printed a one-month low at 0.7174. EUR-USD ebbed back to the lower 1.1300s from the upper 1.1300s. USD-JPY has traded softer, posting a low at 113.42, but remaining within yesterday's 113.36-71 range. The Pound has come under fresh pressure after EU leaders said that the terms of the Withdrawal Agreement were not open for renegotiation, affirming that the deal is likely headed for eventual failure in the UK's Parliament. Cable posted a low at 1.2800, extending a pull lower from the four-day high peak seen yesterday at 1.2687.

    [EUR, USD]
    EUR-USD ebbed back to the lower 1.1300s from the upper 1.1300s. EUR-JPY has also traded softer as risk appetite sours in global markets. Bigger picture, EUR-USD is continuing an oscillate in the 1.1300s, near the midway point of the range that's been unfolding for about six weeks now. We expect the Euro to remain heavy, weighed on by political uncertainty in Europe, a backdrop serving to make the Dollar a more attractive proposition, despite the ongoing recalibration in Fed policy expectations. The risk of a lose-lose no-deal Brexit scenario is also a negative for the Eurozone economy. 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, even if the Fed's tightening course is heading for a pause, while conviction for eventual ECB tightening has concurrently faded with the Eurozone economy losing momentum. The Eurosceptic populist movement gripping parts of the Eurozone, to which Italy's budget-planning woes, the riots in France and the Brexit mess are all symptoms, also remains a concern. EUR-USD has resistance at 1.1390-92, and support at 1.1300.

    [USD, JPY]
    USD-JPY has traded softer, as have most Yen crosses, such as AUD-JPY, which printed four-day lows. This reflected a pick up in safe heaven demand for the Japanese currency as risk appetite soured after Chinese retail sales and production data undershot growth expectations, which in rekindled concerns about flagging global growth. USD-JPY posted a low at 113.42. The pair has so far remained within yesterday's 113.36-71 range. USD-JPY has support at 113.31-33, and resistance at 113.65. Bigger picture, the pairing has been oscillating in a broadly sideways range centred around 112.50-113.00 for over two months now. More of the same looks likely.

    [GBP, USD]
    The Pound has come under fresh pressure after EU leaders said that the terms of the Withdrawal Agreement were not open for renegotiation, affirming that the deal is likely headed for eventual failure in the UK's Parliament. Cable posted a low at 1.2800, extending a pull lower from the four-day high peak seen yesterday at 1.2687. We anticipate that the Pound with remain a sell-into-gains trade into the Parliamentary vote on the Brexit deal, which will be in January (data undecided, but before the legislated deadline of January 21).

    [USD, CHF]
    EUR-CHF has settled in the upper 1.1200s after failing to sustained a brief move above 1.1300 over the last day. The cross remains comfortably above the two-and-a-half month low seen on Tuesday at 1.1225. The SNB remained firmly on hold at its quarterly policy meeting yesterday, continuing to rely on the combination of negative interest rates and the threat of intervention to limit appreciation in the currency in times of heightened uncertainty about the global outlook.

    [USD, CAD]
    USD-CAD has remained buoyant but below last week's 18-month high at 1.3445. A rebound, or at least steadying, in oil prices after OPEC agreed on a 1.2 mln barrel per day output cut, along with Friday's sub-forecast U.S. jobs report, have curtailed USD-CAD's upside momentum. Overall, we continue to take a bullish view. The pair has resistance at 1.3445-50, and support at 1.3320-21.

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