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By XE Market Analysis December 17, 2018 4:03 am
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    XE Market Analysis: Europe - Dec 17, 2018

    Narrow ranges have prevailed in early-week trading so far. EUR-USD has seen no more than a 20-pip range, defined by 1.1299 and 1.1318, above Friday's three-week low at 1.1270, which was printed amid broad demand for the Dollar following net-positive U.S. data. USD-JPY drifted modestly high in making an intraday peak at 113.52. Both pairings have remained comfortably within the respective ranges seen on Friday. Cable, which has declined for three consecutive weeks on Brexit-related angst, which left a 20-month low at 1.2476, steadied to a narrow range in the upper 1.2500s. USD-CAD, which has been upwardly mobile in recent weeks, settled in the upper 1.3300s. The Australian and New Zealand Dollars, which have been under pressure in recent weeks on concerns about the plight of the Chinese economy, also plied narrow ranges against a backdrop of firmer equity markets in Asia-Pacific today.

    [EUR, USD]
    EUR-USD has seen no more than a 20-pip range, defined by 1.1299 and 1.1318, above Friday's three-week low at 1.1270, which was printed amid broad demand for the Dollar following net-positive U.S. data, which in turn followed disappointing preliminary December PMI data out of the Eurozone, where the composite reading fell to a 49-month low of 51.3, down quite sharply from November's 52.7 reading. This data fed the narrative in markets of a Eurozone economy losing growth momentum, which coupled with concerns about the various populist political movements in Europe, of which the riots in France, budget planning woes in Italy and Brexit are all symptomatic of, has been making the Dollar a preferable alternative to the euro, despite the recent recalibration in Fed policy expectations. 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. EUR-USD has resistance at 1.1347-59, and support at 1.1260-62.

    [USD, JPY]
    USD-JPY drifted modestly high in making an intraday peak at 113.52, remaining comfortably within Friday's range. Equity markets in Asia poste moderate gains, as did S&P 500 futures. 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]
    Cable, which has declined for three consecutive weeks on Brexit-related angst, leaving a 20-month low last week at 1.2476, has steadied to a narrow range in the upper 1.2500s. UK Prime Minister has continued to plug away in her diplomatic effort to sweeten the Brexit deal, but it's "crystal clear" -- in the words of European Commission President Juncker on Friday -- that there won't be any renegotiation by the EU, other than a clarification of the deal on offer. This suggest that the Withdrawal Agreement from the EU is headed for eventual failure in the UK Parliament. We anticipate that the Pound with remain a sell-into-gains trade into the Parliamentary vote, which will be in January (data undecided, but before the legislated deadline of January 21). Cable has settled near 1.2600. Resistance is at 1.2633-34.

    [USD, CHF]
    EUR-CHF has settled in the upper 1.1200s after failing to sustained a brief move above 1.1300 last week. The cross remains comfortably above the two-and-a-half month low seen last Tuesday at 1.1225. The SNB remained firmly on hold at its quarterly policy meeting last week, 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 the 18-month high at 1.3445 that was printed on December 6. A rebound, or at least steadying, in oil prices after OPEC agreed on a 1.2 mln barrel per day output cut, along with sub-forecast U.S. jobs data for November, 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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