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By XE Market Analysis December 24, 2014 1:24 am
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    XE Market Analysis: Europe - Dec 24, 2014

    Activity should remain relatively muted through the European session, as markets gear up for a short Wednesday session, followed by a four-day weekend for most participants. The European calendar is empty but for Swiss KOF leading indicator data. EUR-USD looks poised to test the July 30, 2012 weekly low of 1.2134, after posting 1.2165 lows in N.Y. on Tuesday. The dollar in general looks primed for further gains into year-end, with USD-JPY breaching the key 120 level, and setting its sights on 121.00.

    [EUR, USD]
    EUR-USD showed little inclination to bounce after posting new trend lows of 1.2165 in N.Y. on Tuesday. Activity overall should be quite light, as an early departure is planned for most market participants ahead of the Christmas break. The next major support level comes in at 1.2134, representing the July, 2012 low.

    [USD, JPY]
    USD-JPY ran into solid selling interest at 120.80, with Japanese exporter offers note from the 80 level to 121.00. Option barriers at the figure will likely be defended, though given the sharp uptick in risk taking levels into year end, stops noted over 121 could result in a fresh push higher.

    [GBP, USD]
    Sterling remains in sell-the-rally mode, and as the dollar picked up ground on Tuesday, cable fell to levels last seen in late August 2013. The pairing touched lows near 1.5485, with its next target at 1.5428, seen on August 28, 2013. The pound has lost some ground to the euro as well, as EUR-GBP moved up toward 0.7870, after putting in a one-month low of 0.7813 on Friday.

    [USD, CHF]
    EUR-CHF has established a 1.2035-1.2050 range after spiking to a 1.2096 peak on Thursday after the SNB implemented a negative interest rate of -0.25%. SNB member Zurbruegg recently argued that a negative interest rate would be an effective tool as permanent excess liquidity in the Swiss financial system exceeds 300 billion francs. SNB boss Jordan had said last week 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.

    [USD, CAD]
    USD-CAD zigged and zagged after the mix of data, where the better Canadian GDP outcome helped the CAD briefly. Since its dip to 1.1625, USD-CAD rallied to four-session highs of 1.1666, following the greenback's broad rally. Last week's 1.1673 high was the key level to watch, though fresh trend highs were not to be. USD-CAD failed to take out the previous high, and was later pushed back to intra day lows of 1.1600. Sell-stops were reported just under 1.1600, though remained out of harm's way.

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