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By XE Market Analysis November 8, 2018 3:08 am
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    XE Market Analysis: Europe - Nov 08, 2018

    The Dollar has rebound from declines seen yesterday as the U.S. midterms election results spelt out policy gridlock. The re-ascent of the greenback coincided with strong Wall Street gains, where the S&P 500 closed with a 2.1%, which is the best gain seen for the day of a midterm election since 1982. The USD index (DXY) has gained 0.3% so far today, and is now up 0.6% from yesterday's two-week low, while EUR-USD has concurrently posted a two-day low at 1.1412. Cable and AUD-USD have seen similar price actions, while USD-CAD lifted back above 1.3100. USD-JPY has remained buoyant amid the backdrop of rising global stock markets. The pair posted a high of 113.73 to extend the recovery form yesterday's brief foray below 113.00, though has remained below Tuesday's one-month peak at 113.81. We remain bullish of the Dollar, anticipating continued outperformance of the U.S economy versus Europe and Japan, and further Fed tightening.

    [EUR, USD]
    EUR-USD posted a two-day low at 1.1412 as the Dollar rebounded from the losses seen yesterday, in the immediate wake of the midterm election results. A spilt congress spells policy gridlock, but this won't stop the economy, which is enjoying the tail winds of loose fiscal policy, positive global economic growth, and still relatively accommodative monetary policy. We remain bullish of the Dollar, anticipating continued outperformance of the U.S economy versus Europe and Japan, and further Fed tightening. EUR-USD resistance is at 1.1453-55.

    [USD, JPY]
    USD-JPY has remained buoyant amid a backdrop of rising global stock markets, lifting to a high of 113.73 to extend the recovery form yesterday's brief foray below 113.00, though remaining below Tuesday's one-month high at 113.81. 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 ebbed back to a two-day low of 1.3098, tracking EUR-USD's Dollar-driven decline. This bookends a run gains, which has seen Cable rise in five of the previous six trading days, which yesterday left a three-week peak at 1.3175. Recent gains the Pound has reflected a lessening in sterling's Brexit premium, though there is a risk that hopes of the EU and UK are nearing to making an agreement on divorcing terms are being overegged as the seemingly intractable Irish border backstop issue still remains unresolved. Even if a deal is reached, there would remain significant uncertainty about whether it would be pass at parliamentary vote. Cable has support at 1.3041-43 and resistance at 1.3237-40.

    [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 12-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, 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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