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By XE Market Analysis November 11, 2014 3:52 am
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    XE Market Analysis: Europe - Nov 11, 2014

    USD-JPY has punched to a new trend high of 115.85 so far. Buy stops were triggered around 115.55-65. The move comes after Japan's PM Abe said that the intended second sales tax hike will be delayed, according to government sources cited by Reuters. U.S. Fed Fischer has also said that rates could rise in the U.S. before summer 2015, which is when markets are currently expecting, in an interview with the Handelsblatt newspaper today. The dollar is also showing gains against other currencies other than the yen. EUR-USD has dipped below Monday's low in making 1.2404, and Cable and AUD-USD have seen a similar price action -- the latter giving back gains seen in the wake of the NAB business conditions survey, which showed the biggest gain on record in the October on record.

    [EUR, USD]
    EUR-USD has dipped below Monday's low in making 1.2404. The move came after U.S. Fed Fischer has also said that rates could rise in the U.S. before summer 2015, which is when markets are currently expecting, in an interview with the Handelsblatt newspaper today. We remain big picture bears on the basis of our anticipation for higher growth in the U.S. relative to the Eurozone over the next six months, looking for an eventual move on the Oct 2012 low at 1.2040. Nearer-term trend resistance is marked at 1.2533-50.

    [USD, JPY]
    USD-JPY has punched to a new trend high of 115.85 so far. Buy stops were triggered around 115.55-65. The move comes after Japan's PM Abe said that the intended second sales tax hike will be delayed, according to government sources cited by Reuters. Our long-standing target at 115.00 was finally met last week, though we still think divergent economic and central bank policy paths between the U.S. and Japan will remain broadly supportive of USD-JPY.

    [GBP, USD]
    Cable has retreated back below 1.59 amid broad dollar strength. The pair logged a 13-month low at 1.5790 last Friday, which took out our target of 1.5854 (which was the November 2013 low). We anticipate more of the same as we see U.K.'s recovery pace will continue to ebb over the coming quarter due to the impact of economic stagnation across the Channel and de-acceleration in some key emerging markets. This will likely contrast to the situation Stateside. Resistance is at 1.5945-50, 1.6000 and 1.6022-28 (former highs), support at 1.5887-90 and 1.5824-25.

    [USD, CHF]
    EUR-CHF is trading at SNB danger levels, presently holding in a narrow range just above the 26-month low at 1.2022 that was seen on Monday. The franc hasn't seen the south side of 1.2000, the SNB's cap, since it was implemented in Sept 2011. The central bank hasn't needed to intervene since 2012, and can be expected to be resolute in any new defence of 1.2000 after recently threatening negative interest rates if need be. Euro weakness and bouts of risk aversion have been weighing on EUR-CHF, while the approach of the so-call "gold initiative" referendum (aka "Save Our Swiss Gold") in Switzerland on Nov-30 is seen as potentially bearish for EUR-CHF. A 'yes' outcome would require the SNB to raise the percentage of gold reserves to 20% of the total from 8%, which SNB's Danthine argued "would severely constrain the SNB's room for manoeuvre in a future crisis."

    [USD, CAD]
    USD-CAD corrected to the 1.13s after making a new major-trend high at 1.1467 last Wednesday. Resistance is marked at 1.1370-71 and 1.1480-1.1500, support is at 1.1300. We still expect further greenback gains as the risk of continued soft oil prices will be a relative downer for the Canadian dollar.

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