Home > XE Currency Blog > XE Market Analysis: Europe - Jan 12, 2017

AD

XE Currency Blog

Topics3788 Posts3833
By XE Market Analysis January 12, 2017 3:10 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 2662
    XE Market Analysis: Europe - Jan 12, 2017

    Dollar weakness has been the predominant theme so far today after president-elect Trump failed to deliver any fresh insights on his fiscal plans in yesterday's press conference. This was a prompt for the dollar to further correct gains seen during last November-December's Trumpflation trade. USD-JPY ebbed to one-month lows under 114.20, putting in some more distance from the trend high at 118.66, which was seen on December 15. EUR-USD rose to a two-week peak of 1.0638. Even Cable rallied, logging a three-session peak at 1.2273. USD-CAD clocked a one-month low, while AUD-USD and NZD-USD made one-month highs. The yen outperformed amid the generally soft dollar environment. EUR-JPY posted a one-month low, and GBP-JPY a six-week low. Aside from dollar dynamics, higher oil prices and recent weakness in the yen have eroded expectations for the BoJ to further expand monetary policy further, shifted the relative yield dynamic.

    [EUR, USD]
    EUR-USD rose to a two-week peak of 1.0638 as the dollar retreated after president-elect Trump failed to deliver any fresh insights on his fiscal plans in yesterday's press conference. Recent encouraging data and perky inflation figures out of the Eurozone are also in the mix. Support is now marked by the 50-day moving average, at 1.0569, while the December-29 peak at 1.0657 provides a near-term target.

    [USD, JPY]
    Waning upside momentum indictors over the last seven weeks have proved their worth as directional prompts, with USD-JPY ebbing to a one-month low under 114.20, putting in further distance from the trend high at 118.66, which was seen before Christmas. The move reflected broader dollar weakness, which has been seen after president-elect Trump failed to deliver any fresh insights on his fiscal plans in yesterday's press conference. EUR-JPY also posted a one-month low, and GBP-JPY a six-week low, with the yen outperforming amid the generally soft dollar environment. USD-JPY lost upside thrust over the Christmas/New Year period. Aside from dollar dynamics, higher oil prices and recent weakness in the yen have eroded expectations for the BoJ to further expand monetary policy further, shifted the relative yield dynamic. Resistance is now at 114.70, which is the current position of the 50-day moving average.

    [GBP, USD]
    The pound has found a footing after a spate of underperformance, which left between six- and 10-week lows versus the G3 currencies. Concerns about Brexit, specifically PM May's suggestion that the government is setting a course for a "hard" exit (giving up free access to the single market), have more than offset the stellar readings of last week's December PMI surveys out of the UK. We remain cautiously bearish of Cable. .

    [USD, CHF]
    EUR-CHF has settled above 1.0700 after logging a two-week low at 1.0680 last week. The franc's strength against the euro, which is a proxy of the trade-weighted value of the Swiss currency, will be an ongoing concern for Swiss policymakers, although Swiss December CPI last week lifted to 0.0% y/y from -0.3% y/y in the previous month, breaking a run of 25 consecutive months of negative prints. This compares to an average CPI rate of -0.4% y/y for 2016. Base effects, both from oil and energy prices, and the franc, suggest that CPI will be biased higher over the coming months, which should help Swiss policymakers breathe easier.

    [USD, CAD]
    USD-CAD fell to a one-month low at 1.3113 after Trump failed to reignite the Trumpflation trade. A near 3% rebound in oil prices over the last day added to downside bias. USD-CAD closed below its 200-day moving average, presently at 1.3153, for the first time since last September. The next downside target is provided by the December-14 low, at 1.3080.

    Paste link in email or IM