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By XE Market Analysis January 14, 2019 4:42 am
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    XE Market Analysis: Europe - Jan 14, 2019

    A risk-off theme underpinned the Yen while weighing on the Dollar bloc currencies. AUD-JPY, NZD-JPY and CAD-JPY are all showing gains of over 0.5%. This came with Asian stock markets and oil and other resource commodity prices tumbling after China trade data showed imports down 7.6% y/y in December while exports contracted 4.4% y/y. AUD-USD is posting its first down day since January 2, posting a two-session low at 0.7175. The Dollar has traded mixed, losing ground to the Yen but gaining modestly on the Euro. USD-JPY printed a two-session low at 108.04. EUR-USD carved out a three-session low at 1.1454. We expect risk-off conditions will sustain into the European and American sessions.

    [EUR, USD]
    EUR-USD carved out a three-session low at 1.1454, extending the decline from the three-month peak seen at 1.1570 last week. The high was seen following a cacophony of Fed speakers which communicated hawkish-to-neutral shift in the policy stance. Since then, concerns about a slowing Eurozone economy have weighed on EUR-USD, with the Dollar also find some safe-haven demand amid a souring in risk appetite in global markets. EUR-USD has support at 1.1439-40, and resistance at 1.1496-98.

    [USD, JPY]
    USD-JPY printed a two-session low at 108.04 as a risk-off theme underpinned the Yen. The biggest movers have been AUD-JPY, NZD-JPY and CAD-JPY, which all rose by more than 0.5%. This came with Asian stock markets and oil and other resource commodity prices tumbling after China trade data showed imports down 7.6% y/y in December while exports contracted 4.4% y/y. USD-JPY has support at 107.77-80.

    [GBP, USD]
    The Pound has remained in a directional stasis in trade-weighted terms as market participants wait for tomorrow's UK Parliament vote on the EU Withdrawal Agreement and outline for a future relationship. The leader of the principal opposition party, Labour, has called for a general election in the event that the deal is voted down, which is looking highlight likely to be the case. However, a general election is almost certain not to happen as the ruling Conservative and DUP parties won't want this, having over three years left before an election is due. Of all the possible scenarios that will open up at point that the government's Brexit deal is voted down, our best guess is that a new EU referendum will be the path of least resistance, despite elevated media talk and preparations for a no-deal Brexit scenario. We think a no-deal scenario is unlikely given the overwhelming majority of MPs are against allowing this to happen. Cable has support at 1.2800.

    [USD, CHF]
    EUR-CHF has settled back in the upper 1.1200s after printing a three-week high at 1.1340 last week. The move was driven by a bout of across-the-board franc selling, which came amid rumours of SNB intervention, which, if this was the case, would look to have been tactically timed to be in concert with the improved risk appetite in global markets. The cross had earlier in the month punched out a four-month low at 1.1184, which was seen as the Swiss currency picked up safe haven demand amid a bout of turmoil in global markets. The SNB remained firmly on hold at its quarterly policy meeting last month, continuing to rely on the combination of negative interest rates and the threat of intervention to limit appreciation in the currency.

    [USD, CAD]
    USD-CAD lifted to a six-day high at 1.3298, reflecting underperformance of the Canadian Dollar, along with its Dollar bloc brethren. This followed unexpected weakness in Chinese trade data, which rekindled narratives about slowing global growth, and in sequence weighing on oil and resource commodity prices. We advice following USD-CAD higher for now. Support comes in at 1.3254, and resistance at 1.3325.

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