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By XE Market Analysis December 18, 2018 3:35 am
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    XE Market Analysis: Europe - Dec 18, 2018

    The Yen has been buoyed amid a risk aversion theme in global markets after Wall Street closed with 2%-plus declines yesterday and with Asian equity markets also taking a tumble today. USD-JPY posted an eight-day low of 112.47. Yen crosses also saw a similar price action, with the high beta AUD-JPY cross coming within 10 pips of seven-week lows. Concerns about slowing global growth concerns and a pre-emptive bout of market indigestion at the prospect of the Fed hiking rates tomorrow have afflicted sentiment, although the Fed's move is expected to be of the "dovish tightening" variety with accompanying guidance expected to signal a pause in the tightening cycle. Elsewhere, EUR-USD has continued to oscillated on the 1.1300 handle, while the Pound has continued to hold steady despite ongoing political Brexit-related dramas in the UK (the leader of the opposition yesterday calling for a confidence vote on the government, a move that doesn't look to have sufficient parliamentary support, while Prime Minister May's cabinet will reportedly be meeting today to discuss no-deal contingency plans). Cable has settled in the lower 1.2600s, comfortably above the 20-month seen last week at 1.2476.

    [EUR, USD]
    EUR-USD has continued to oscillate in the 1.1300s. The piar 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 based on the expected relative strength of the Eurozone and U.S. economies. Resistance is at 1.1393-95, and support comes in at 1.1299-1.1300.

    [USD, JPY]
    The Yen has been buoyed amid a risk aversion theme in global markets after Wall Street closed with 2%-plus declines yesterday and with Asian equity markets also taking a tumble today. USD-JPY posted an eight-day low of 112.47. Yen crosses also saw a similar price action, with the high beta AUD-JPY cross coming within 10 pips of seven-week lows. Concerns about slowing global growth concerns and a pre-emptive bout of market indigestion at the prospect of the Fed hiking rates tomorrow have afflicted sentiment, although the Fed's move is expected to be of the "dovish tightening" variety with accompanying guidance expected to signal a pause in the tightening cycle. USD-JPY has support at 112.23-25, and resistance at 113.00. 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 continued to hold steady despite ongoing political Brexit-related dramas in the UK. The leader of the opposition, Jeremy Corbyn, yesterday called for a confidence vote on the government, a move that doesn't look to have sufficient parliamentary support, while Prime Minister May's cabinet will reportedly be meeting today to discuss no-deal contingency plans. UK Prime Minister is continuing to plug away in her efforts to sweeten the Brexit deal, but it's clear there won't be any renegotiation by the EU, while support for a "Final Say" referendum or simply a new referendum on EU membership has been growing. We expect the UK currency to remain a sell-into-gains trade into the Parliamentary vote, which has been confirmed to take place in the week of January 14 (before the legislated deadline of January 21). Cable has resistance is at 1.2687-90.

    [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. Fresh declines in oil prices, which has seen the WTI crude benchmark hit a fresh 15-month low under $49.0, should maintain pressure on the Canadian Dollar. Ee continue to take a bullish view. The pair has resistance at 1.3445-50, and support at 1.3320-21.

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