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By XE Market Analysis November 7, 2018 11:07 am
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    XE Market Analysis: Europe - Nov 06, 2018

    The Yen has broken lower while the Australian and New Zealand Dollars have lifted moderately higher in otherwise range-restricted trading so far today as market participants wait on the U.S. midterm elections, which carry significance for the Trumpian project. Asian stock markets have mostly lifted after a positive session on Wall Street, which set the scene for Yen softness in accordance with the usual correlative pattern. USD-JPY edged out a one-month high of 113.44, while EUR-JPY has ascended into two-week high altitudes, and AUD-JPY into one-high terrain. EUR-USD has remained in a tight orbit of the 1.1400 level, which approximately marks the midway point of the range that's been seen over the last 10 days or so. AUD-USD lifted to two-session highs above 0.7220. The RBA left policy unchanged as had been widely anticipated, with Governor Lowe's statement signalling a continued on-hold for now policy bias with a view to eventually tighten. Cable has remain buoyant, although below yesterday's two-week high at 1.3071, while GBP-JPY has vaulted to three-week highs.

    [EUR, USD]
    EUR-USD has continued to narrowly orbit the 1.1400 level, which approximately marks the midway point for the range that's been seen over the last couple of weeks. We remain bearish of EUR-USD with signs of flagging economic growth momentum in the Eurozone, along with concerns about the Eurosceptic political movement, juxtaposing a U.S. economy in relative health (as evidenced by Friday's October employment report). EUR-USD resistance comes in at 1.1462-65.

    [USD, JPY]
    USD-JPY has remained buoyant, edging out a 113.36 high, which is within 2 pips of the four-week high that was printed last week. EUR-JPY, meanwhile, is with a hair's breath of two-week highs, and AUD-JPY is within a few pips of the one-high posted yesterday. The Nikkei 225 closed with a 1.14% gain in what has been a mixed session across Asian bourses, with Chinese markets lower, once again, despite a positive close on Wall Street and modest advance in S&P 500 futures. Directional ambition looks to be curtailed into today's midterm elections in the U.S, which carries potential implications for Trumpian economic policy should the Democrats wrest control of the House. USD-JPY's fundamentals (yield differentials and the associated contrast between Fed and BoJ policy paths) remain supportive, although periodic episodes of risk aversion has been an intermittent offsetting bearish force. USD-JPY has support at 112.35-37.

    [GBP, USD]
    Cable has remain buoyant, although below yesterday's two-week high at 1.3071, while GBP-JPY has vaulted to three-week highs. The Pound was boosted yesterday by a Sunday Times report claiming that the EU and UK are close to making a deal on Brexit, which will reportedly involve keeping the UK in the customs union. There has been a lack of zeal for follow-on gains in the pound, however, with both the British government and the EU have downplayed hopes for an imminent deal, saying that there remains work to be done, while the Eurosceptic members of Prime Minster May's Tory Party are being vociferous in their objections. UK government sources cited by Sky News also said that the Irish backstop -- the Irish and EU's insistence that the divorce settlement includes a guarantee that the border on the island of Ireland will remain free-flowing in any post-Brexit scenario -- remains a major obstacle. Cable has been chopping around the 1.3000 level for about two months now, and more of the same looks likely. Support comes in at 1.2918-20, and resistance at 1.3041-43.

    [USD, CHF]
    EUR-CHF has recouped back above 1.1400, recovering rom the five-week printed at 1.1355 in late October, which extended a descent from levels above 1.1500. The cross has support at 1.1405-10.

    [USD, CAD]
    USD-CAD has settled around 1.3100, above the 11-day low seen on Friday at 1.3049 and below the two-month high see last Wednesday at 1.3170. Fresh seven-month lows in oil prices today, coupled with Friday's miss in Canada's October jobs report, which contrasted with the strong U.S. jobs report for the same month, should keep USD-CAD underpinned. USD-CAD has support at 1.3049-50, and resistance at 1.3137-40.

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