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By XE Market Analysis November 17, 2017 3:26 am
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    XE Market Analysis: Europe - Nov 17, 2017

    The dollar has been trading mixed so far today, losing ground to the yen, euro and sterling, while gaining versus the Australian dollar, other dollar bloc currencies, and most emerging market units. USD-JPY was the biggest mover, logging a one-month low at 112.39. The mixed performance of the dollar follows a mixed set of data releases yesterday, which on net, along with Fedspeak, still left the Fed on track to hike rates at the upcoming FOMC meeting in December, and beyond. The House passed its version of the tax reform bill, which now goes before the Senate then potentially comes back for reconciliation between the two bodies. The calendars in Europe and the U.S. are relatively quiet, while Canada has the release of October CPI, which we expect will cool to a 1.4% m/m rate (median 1.5%) after 1.6% in the month prior.

    [EUR, USD]
    EUR-USD turned lower after a brief foray back above the 1.1800 level, meeting good selling interest above here for a second consecutive day. Overall, there is a lack of strong directional leads. Focus turns to the passage of the Senate tax reform bill after the House passed its version. The data calendars are quiet today on both sides of the Atlantic. EUR-USD has near-term support 1.1755-60.

    [USD, JPY]
    USD-JPY has traded firmer today, rising concomitantly with stock markets in Europe and Asia. U.S. equity index futures are also up after the S&P 500 posted its biggest daily loss yesterday in two months. The yen has been correlating inversely with global stock markets this week, as it is apt to do during phases of pronounced swings in investor risk appetite. The weakness in the currency today has in turn injected extra buoyancy into Japanese stock markets, with the Topix index outperforming most of its regional peers with a gain of just over 1%. News that two U.S. senators (Ron Johnson and Susan Collins) have publically criticised the tax reform bill may limit the rebound potential of stock markets, at least on Wall Street, so we advise some caution with regard to USD-JPY. The pair has resistance at 113.27-30, and support at 112.75, ahead of 112.48-50.

    [GBP, USD]
    Sterling has been trading mixed in recent sessions. Forecast-beating retail sales data out of the UK yesterday gave the pound a leg higher earlier, though Brexit-related noise seems to have deterred follow-through buying. The Dutch parliament warned its government to start making serious contingency plans for a "no deal" Brexit, which is the latest sign of rising concerns about a lose-lose trade situation in a messy Brexit scenario. Goldman Sachs chief executive Blankfein also tweeted that "many" British CEOs wish for a confirming vote on the decision to leave the EU, to "make sure" that the consensus is still there -- remarks that will doubtlessly prompt a stern rebuttal from Brexiteers as being from a "globalist" interest. Cable has settled around 1.3200 after lifting from levels around 1.3140-50 during the London AM session. The 1.3200-50, approximately the half way mark of a range that's being in play for six weeks now. A series of daily lows that were seen in October between 1.3027 and 1.3039, mark a key support zone.

    [USD, CHF]
    EUR-CHF clocked a 34-month high at 1.1723, subsequently settling back under 1.1700. With the Eurozone gathering growth momentum, and seeming to have conquered existential political 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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