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By XE Market Analysis January 24, 2019 3:26 am
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    XE Market Analysis: Europe - Jan 24, 2019

    The Dollar has been trading firmer in to the London interbank open. EUR-USD has ebbed back towards 1.1370 after yesterday's upswing failed to clear 1.1400. USD-JPY has lifted to the 109.70 area, returning focus on yesterday's 110.00 peak. Cable and AUD-USD have also ebbed back. Stock markets in Asia have mostly gained, S&P 500 futures are flat, while oil prices remain heavy in what could be described as a risk-wary sentiment. Encouraging corporate earnings have helped animate investor spirits, though the partial government shutdown in the U.S., trade tensions and Brexit uncertainty, particularly the risk of there being a no-deal Brexit scenario, remain on the worry list.

    [EUR, USD]
    EUR-USD has ebbed back towards 1.1370 after yesterday's upswing failed to clear 1.1400. Despite rising yesterday, we still expect a flat-to-downward bias to prevail given the backdrop Eurozone-slowing narrative, though jwould see greater odds for a stronger break to the downside 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 has lifted to the 109.70 area, returning focus on yesterday's 110.00 peak. Stock markets in Asia have mostly gained, S&P 500 futures are flat, while oil prices remain heavy in what could be described as a risk-wary sentiment. Encouraging corporate earnings have helped animate investor spirits, though the partial government shutdown in the U.S., trade tensions and Brexit uncertainty, particularly the risk of there being a no-deal Brexit scenario, remain on the worry list. We see risk for fresh USD-JPY declines should global stock markets turn lower again. The pair has resistance at 110.00-05.

    [GBP, USD]
    Sterling's upward realignment phase has continued, with Cable posting an 11-week peak at 1.3080, which at that level was 1% gain on the day. The pair subsequently ebbed slightly into the London fix, but held the line at around 1.3060. EUR-GBP printed a two-month low at 0.8698. This is the third consecutive week that the pound has rallied against both the dollar and euro. News that the Labour Party will likely join the cross-party motion to legislate against the possibility for a no-deal Brexit scenario has lifted the pound, which we expect to be on route to the a new trading range in the mid 1.30s.

    [USD, CHF]
    EUR-CHF has settled toward the 1.1300 level, consolidating lower after carving out a one-month high on Monday at 1.1347. USD-CHF has also settled at softer levels 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 this week 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 printed a 17-day high at 1.3371 yesterday, and has since underpinned on dips. A risk-cautious backdrop and flagging lower oil prices has generated the conditions for a generally firmer U.S. dollar and a generally weaker Canadian dollar. USD-CAD has support at 1.3312-15.

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