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By XE Market Analysis November 18, 2015 3:13 am
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    XE Market Analysis: Europe - Nov 18, 2015

    The euro remains heavy, EUR-USD meeting resistance around 1.0650-55 on several occasions in late North American trade yesterday, and during pre-Europe Asian dealings today. The seven-month low at 1.0631 looks vulnerable. Markets are likely to remain jittery amid reports of a policy shootout with suspected terrorist/terrorists during a raid in a Paris suburb. Two Air France planes were also diverted. In the mix is President Xi if China, who said that the economy is facing "considerable downward pressure." Commodity prices are likely to remain heavy, with the Bloomberg's commodity index logging 16-year lows yesterday, having declined in nine of the last 10 days. AUD-USD, which has been surprisingly resilient this week, has sunk back below 0.7100 after capping out at 0.7139 yesterday. USD-JPY has remained within a 25 pip range in the low-to-mid 123s so far today. Elsewhere, sterling has posted moderate losses against both the dollar and euro, lifting EUR-GBP back above 0.7000 after yesterday trading below here for the first time since August.

    [EUR, USD]
    EUR-USD has remained heavy after clocking a a new seven-month low of 1.0631 yesterday. The 1.0650-55 has been proving to be an effective near-term resistance zone. Terror-related concerns aside, the sharply contrasting policy stances of the ECB and Fed should maintain EUR-USD's downward bias. We anticipate further declines toward the mid-March low at 1.0469 over time.

    [USD, JPY]
    USD-JPY has remained in a relatively narrow range in the low-to-mid 123. Japanese exporter selling has helped brake upside progress. We continue to anticipate USD-JPY will revisit of the 125.0 level on the back of the Fed's tightening bias, however.

    [GBP, USD]
    Sterling has posted moderate losses against both the dollar and euro, lifting EUR-GBP back above 0.7000 after yesterday trading below here for the first time since August. This was the second day in a row that the pound saw selling during Asian hours. The pound has unwound the gains seen in the wake of data yesterday showing slightly warmer than expected core CPI and PPI output readings in the October inflation report, although headline CPI came in at the widely anticipated -0.1% y/y reading, matching the September rate. We continue to expect the pound to hold its own against the greenback, or at least outperform the euro in the scenario of further broad dollar gains into next month's FOMC. The UK's Oct-Sept labour market report last week showed unemployment unexpectedly falling to a to a cycle low of 5.3%, and the employment rate rising to a record. UK retail sales for October, due out today, should also paint a rosy picture of the sector, although a correction is likely after a stellar sales in September. Cable support is at 1.5150-55 and 1.5128-30.

    [USD, CHF]
    EUR-CHF has settled to a tight range around 1.0800 after yesterday logging a six-day low at 1.0774. The cross failed to sustain losses below the 100-day moving average at 1.0778. The bias remains to the downside, however, given the ECB's policy path, which will be a tide that the SNB will find hard to stop, although the cross still remains comfortably above the sub-1.05 levels that were seen earlier in the year, before the SNB cut the deposit rate to -0.75%.

    [USD, CAD]
    USD-CAD has settled after making a seven-week peak of 1.3370 yesterday. Three-month lows in oil prices has weighed on the Canadian dollar, while the greenback remains the long of choice as the Fed prepares for rate liftoff. The major trend peak at 1.3457 is likely to be revisited on the back of the Fed's course to hit the rate lift-off button.

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