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By XE Market Analysis November 14, 2017 3:20 am
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    XE Market Analysis: Europe - Nov 14, 2017

    The dollar majors have been trading mixed, with EUR-USD opening in the London interbank market on a bid following above-forecast German GDP data, pushing to early-November highs near 1.1690, while USD-JPY has continued to flat-line around 113.60-65 -- a directionless pattern that has been concomitant with relative stability in global stock markets. The NZ dollar has been under the cosh, with the antipodean currency showing a 0.7% loss to the U.S. buck and a 0.8% decline versus the Aussie dollar. A strong NAB business survey for October sparked buying of Australian dollars, and a specific bid in AUD-NZD, with markets still trying to factor in the policy direction of the new government in New Zealand. Slightly weaker than forecast industrial production and retail sales data out of China subsequently curtailed demand for the Aussie. AUD-USD logged an intraday high of 0.7638.

    [EUR, USD]
    EUR-USD opened in the London interbank market on a bid following above-forecast German GDP data, pushing to early-November highs near 1.1690. We expect the near-term bias will remain to the upside. Aside from incoming data, markets will continue to monitor the tax reform debate in the U.S., still unclear about the scale, content and timing, which, while the uncertainty persists should limit EUR-USD's downside potential. Support is at 1.1623-25, while, on the upside, key resistance levels are at 1.1687-91 and 1.1700.

    [USD, JPY]
    USD-JPY has been flat-lining around 113.60-65, a directionless pattern that has been concomitant with relative stability in global stock markets. USD-JPY's two-month rally phase has been losing momentum, and a relatively sustained correction looks to be afoot. We expect markets will remain sensitive to the ongoing tax cut debate. Support is at 113.25-26 and 113.09-10, and resistance is at 113.87-90.

    [GBP, USD]
    The pound has come under pressure over the last day. Cable clocked an eight-day low at 1.3061 yesterday, and a subsequently rebound stalled around 1.3130. Open dissention in the ranks of the government catalysed selling of the pound, with reports that some 40 Tory MPs are ready to sign a no confidence vote against the prime minister, and there are concerns that the Brexit bill won't pass the upcoming parliamentary vote. This backdrop will likely overshadow the release of the UK's October inflation data today. We expect headline CPI to tick up to a new cycle high of 3.1% y/y (median 3.2%) from the 3.0% y/y rate seen in September, which would be consistent with the BoE's projections laid out in the recent November inflation report. Cable has been trading in the low 1.30s for over a month, but risks for a downside break are rising. A series of daily lows that were seen in October between 1.3027 and 1.3039, which now form a key support zone. Resistance is at 1.3168-70.

    [USD, CHF]
    EUR-CHF has been relatively settled over the last couple of weeks, trading on either side of the 1.1600 level. The 33-month peak seen in late October at 1.1712 has slipped off the radar screen for now, though, with the Eurozone gathering growth momentum, and seeming to have conquered political existential threats, we continue to anticipate an eventual return to 1.2000, which is the former trading floor of the SNB.

    [USD, CAD]
    USD-CAD has settled in the mid 1.2700s after logging a three-week low at 1.2665 last week, which reaffirmed an emergent downward trend. The pair's two-month rally phase from sub-1.2100 levels looks to have stalled over the last week or so. BoC Governor Poloz last week reaffirmed guidance given last month by saying that "the economy is likely to require less monetary stimulus over time, we will be cautious in making future adjustments to our policy rate." We project the next BoC rate hike to be in March, and expect USD-CAD to remain in a downward path for now. Resistance is at 1.2700-05, and support is at 1.2600-02.

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