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By XE Market Analysis March 13, 2018 4:49 am
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    XE Market Analysis: Europe - Mar 13, 2018

    The yen backed out of early-Tokyo highs and is showing an average 0.4% decline versus the dollar and euro heading into the London interbank open. USD-JPY logging a high of 106.90 after posting a three-session low at 106.25. EUR-JPY also lifted out of a two-session low to make a two-session high of 131.77. AUD-JPY and other yen crosses saw a similar price action. The dollar, meanwhile, traded with a steady-to-firmer tilt with markets eyeing today's release of the U.S. CPI, a data series that has been having a relatively heightened influence on markets as the participants look to fine tune their Fed policy expectation. EUR-USD has ebbed to the 1.2325 area, moderately lower from a 1.2345 two-session high that was seen in early Tokyo. As for the yen's weakness, this has come despite a flagging bullish sentiment in global equity market, though in the bigger view the Japanese currency yen has been trading in a relatively narrow sideways pattern over the last week, and USD-JPY is near to the midway point of the range that's been seen over the last month. Japan's finance minister Aso is likely to skip next week's G20 meeting due to the alleged embroilment of the Ministry of Finance with a state land sale scandal. In data, Japan's tertiary index contracted by 0.6 % m/m, worse than the -0.3% median forecast.

    [EUR, USD]
    EUR-USD has ebbed to the 1.2325 area, moderately lower from a 1.2345 two-session high that was seen in early Tokyo. In the big view, EUR-USD has returned to midway levels of a range that's been seen since late January, which marks a consolidative phase after rallying out of sub-1.1600 levels that were seen last November. Support is at 1.2275.

    [USD, JPY]
    USD-JPY lifted amid broader yen weakness today, logging a high of 106.90 after posting a three-session low at 106.25. EUR-JPY also lifted out of a two-session low to make a two-session high of 131.77. AUD-JPY and other yen crosses saw a similar price action. The yen's weakness came despite a flagging bullish sentiment in global equity market. In the bigger view, the yen has been trading in a relatively narrow sideways pattern over the last week, and USD-JPY is near to the midway point of the range that's been seen over the last month. There have been yen bullish market narratives in circulation this year rooted on the expected impact that the BoJ's eventual withdrawal from ultra-accommodative monetary policy will have, though recent parliamentary testimonies of BoJ policymakers suggests the focus remains squarely on the chronically benign inflation picture. In Japanese news today, there have been reports that finance minister Aso is likely to skip next week's G20 meeting due to the alleged embroilment of the Ministry of Finance with a state land sale scandal. In data, Japan's tertiary index contracted by 0.6 % m/m, worse than the -0.3% median forecast. We see USD-JPY as more likely seeing 110.00 than of seeing 100.00. USD-JPY has support at 106.25.

    [GBP, USD]
    Cable traded at one-week highs, with the finding a boost from Brexit-related news yesterday, with the UK's junior minister of exiting the EU, Walker, saying that a deal on a transition deal is "very close." The news from Walker comes as the EU leaders' summit on March 22nd-23rd starts to loom large on the near horizon. We don't anticipate too much follow-through buying of pounds are there remain key know unknowns regarding Brexit, including the Irish border issue, the future trade agreement, and to what extent the EU will be flexible with regard to forging a deal on London financial markets, which is uncertain in light of the response of EU officials to PM May's recent clarification that her government will be going for a hard Brexit. Cable is has been trading without direction over the last month, presently near the midway point of the range that's been seen over this period. We expect more of the same for now. Support is at 1.3809-10.

    [USD, CHF]
    EUR-CHF has been upwardly mobile since late February, clocking a six-week high at 1.1741 last Thursday. The break higher has tracked a broader rebound in the common currency, with markets finding some relief as the new political picture starts to emerge following the Italian election on Sunday. While the results were messy, and brought Eurosceptic parties to the fore, the general view is that neither the euro or the EU will face an existential crisis. The EUR-CHF cross, which rallied some 10% from mid last year, has been emblematic of the euro's recovery over the last year, with the franc unwinding latent safe haven premium as existential uncertainties under the Eurozone and EU come off the boil. Former resistance is at 1.1563-65 now reverts as support.

    [USD, CAD]
    USD-CAD has settled in the mid 1.28s after drifting down from the nine-month peak at 1.3001 that was seen in the early part of last week, which capped a six-week bullish run seen. The Canadian dollar has managed to find its feet on news that Trump will exempt Canada, along with Mexico, from his proposed steel an aluminium tariffs (though this will be temporary and subject to how the White House sees NAFTA negotiations go). We anticipate that USD-CAD will remain in a consolidation for now. Momentum indicators had been flashing "overbought" lately following a strong rally from sub-1.2300 levels that were seen in early February.

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