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By XE Market Analysis January 22, 2019 3:53 am
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    XE Market Analysis: Europe - Jan 22, 2019

    The Dollar and Yen have traded firmer against most other currencies, with the Japanese unit itself outperforming overall, which has pressed USD-JPY to a two-day low of 109.38. Forex markets are in a safe-haven mode, with Asia stock markets down and S&P 500 futures racking up a 0.8% loss in overnight trading, pointing to a hefty opening loss on Wall Street later. A cacophony of warnings from the IMF and CEOs of major global corporations about the global economic outlook have taking a toll on market spirits. Oil prices are down, too, after reaching seven-week highs yesterday (in the WTI crude benchmark). EUR-USD scratched out an 18-day low at 113.46, while AUD-USD posted a two-week low, at 0.7124, and USD-CAD a two-week high, at 1.3336. Cable posted a low at 1.2860, wiping out most of yesterday's gains. On the Brexit front, the UK's parliament will vote on a modified version of Prime Minister May's Withdrawal Agreement next Tuesday, January 29, with May pledging to try an win concessions from the EU on the Irish backstop, in the hope that this would win the support (and votes) of Northern Ireland's DUP and the hard Brexiteer faction in her Conservative Party. But, May provided little detail while EU officials yesterday reaffirmed that there can be no renegotiation.

    [EUR, USD]
    EUR-USD scratched out an 18-day low at 113.46, driven by a generally firmer Dollar. We expect a flat-to-downward bias to prevail given the backdrop Eurozone-slowing narrative, seeing greater odds for a downside break if there is positive news on the partial shutdown in the U.S. and/or a breakthrough on the U.S.-China trade negotiation front. EUR-USD resistance comes in at 1.1407-10.

    [USD, JPY]
    USD-JPY edged out a two-day low of 109.38, driven by Yen outperformance as forex markets adopt a safe-haven mode. Asia stock markets came under pressure today, and S&P 500 futures racked up a 0.8% loss in overnight trading, pointing to a hefty opening loss on Wall Street later. A cacophony of warnings from the IMF and CEOs of major global corporations about the global economic outlook have taking a toll on market spirits. Oil prices are down, too, after reaching seven-week highs yesterday (in the WTI crude benchmark). USD-JPY support comes in at 109.06-08, and resistance at 109.92-94.

    [GBP, USD]
    Cable posted a low at 1.2860, wiping out most of yesterday's gains. On the Brexit front, the UK's parliament will vote on a modified version of Prime Minister May's Withdrawal Agreement next Tuesday, January 29, with May pledging to try an win concessions from the EU on the Irish backstop, in the hope that this would win the support (and votes) of Northern Ireland's DUP and the hard Brexiteer faction in her Conservative Party. But, May provided little detail while EU officials yesterday reaffirmed that there can be no renegotiation. We still think that a new referendum will prove the route of least resistance.

    [USD, CHF]
    EUR-CHF has ebbed back to the lower 1.1300s after carving out a one-month high yesterday at 1.1347. USD-CHF is also softer after also trading at one-month highs. Recent underperformance of the Swiss franc has been accompanied by talk/suspicions of SNB intervention. SNB vice president, Zurbruegg, said that "the uncertainties concerning further developments (the world economy) have increased recently", and said that Swiss growth is expected to slow this year. He added that "the franc remains highly valued" and the situation on foreign currency markets is "still fragile." He also said that the SNB's two pillar strategy that focuses on negative interest rates and the threat of ad-hoc currency interventions "remains appropriate."

    [USD, CAD]
    USD-CAD posted a two-week high, at 1.3336. A risk-off backdrop and associated lower oil prices has generated the conditions for a generally firmer U.S. dollar and a generally weaker Canadian dollar, which, along with its Dollar bloc brethren, have been underperforming this week. USD-CAD's new high extends a rebound from the six-day low printed on Tuesday at 1.3226. Canada's calendar picks up today with manufacturing shipment values and wholesale shipment values. USD-CAD has support at 1.3297-99.

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