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By XE Market Analysis November 24, 2017 3:05 am
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    XE Market Analysis: Europe - Nov 24, 2017

    The dollar has managed to find a footing, with USD-JPY recouping above 111.50, putting in a little distance from the two-month low seen at 111.06 during early trading yesterday. EUR-USD dipped under 1.1840 after earlier edging out a nine-day high of 1.1859. An evolving political crisis in Ireland seems to have encouraging some selling of euros. The dollar also picked up come corrective bids against sterling and the Australian dollar, among other currencies. Tokyo markets returned after Japan's holiday yesterday, and the BoJ announced it was reducing the size of its JGB purchases today by Y10 bln. The BoJ news tallies with a Reuters report this week, citing sources, that central bank policymakers are starting to shift out of an ultra-dovish mindset. However, the yen still traded softer despite this, ebbing versus the dollar and most other currencies. Mostly higher stock markets in Asia were conducive of a softer yen. Focus now shifts to European data, where the latest German Ifo business climate indicator is due. U.S. markets return from Thanksgiving, though conditions will remain thin. Treasury futures and the NYSE will be closing early, at 1pm in New York.

    [EUR, USD]
    EUR-USD dipped under 1.1840 after earlier edging out a nine-day high of 1.1859. An evolving political crisis in Ireland seems to have encouraged some selling of euros, adding to political uncertainty in Germany. On the dollar side of the coin, the minutes to the recent Fed policy meeting highlighted policymaker concern about the persistence of benign inflationary readings, which will likely limit the dollar's upside potential. EUR-USD has resistance at 1.1861 (the November-15 high) and 1.1878-80 (which encompasses the October highs). A break and close above these levels would swing the scopes back on the 1.2000 level. Support is at 1.1810-13.

    [USD, JPY]
    USD-JPY has found a footing, recouping above 111.50, putting in a little distance from the two-month low seen at 111.06 during early trading yesterday. Tokyo markets returned after Japan's holiday yesterday, and the BoJ announced it was reducing the size of its JGB purchases today by Y10 bln. The BoJ news tallies with a Reuters report this week, citing sources, that central bank policymakers are starting to shift out of an ultra-dovish mindset. However, the yen still traded softer despite this, ebbing versus the euro, Australian dollar and other currencies today in the Asia-Pacific session. Mostly higher stock markets in Asia were conducive of a softer yen. We still see USD-JPY's price action this week as having reaffirmed the bearish trend that's been in evolution since early November. The September low at 110.83 provides the next downside waypoint. Resistance is at 111.77-80.

    [GBP, USD]
    Cable has coat-tailed EUR-USD higher this week while simultaneously losing ground to the euro and yen, reflecting broad dollar weakness on the one hand, and a bearish pound sentiment on the other following notable downgrades in official UK growth projections. The second release UK Q3 GDP figure had little impact, confirming growth at 0.4% q/q and 1.5% q/q. Cable lifted out of a 1.3212 low on Wednesday to a peak today of 1.3336, since settling near 1.3300. At the same time, EUR-GBP lifted to a four-session peak at 0.8921. Both the UK government's fiscal budget this week was, in the aggregate view, and the OBR's growth downgrade, were near expectations, so the overall market impact has been correspondingly restrained. An FT report attested that the EU and UK have a breakthrough in the works with regard to agreeing on Brexit divorcing terms, though doubts remain. The pound has been broadly holding its own versus the major currencies over the last month or two, and we expect this to remain the case for now, though we still see the balance of risks being skewed to the downside.

    [USD, CHF]
    EUR-CHF has settled in the lower 1.16s having recouped from Monday's swift dive to a 1.1591 low, which was seen as markets reacted to the news that talks to form a coalition government in Germany had collapsed. The cross had posted a 34-month high at 1.1723 on Friday, though with political uncertainties now prevailing in Germany (where new elections may not happen until next March), we expect EUR-CHF to trend sideways, with risks tilted to the downside for now. Key support is at 1.1542-45.

    [USD, CAD]
    USD-CAD vaulted upwards on weak Canadian data yesterday, which has driven the pairing over 50 pips higher in today extending to a 1.2735 high. The pair had before the data clocked an 11-day low at 1.2672, which was seen amid broader weakness in the U.S. dollar. Canadian retail sales data showed a 0.1% m/m rise, well off the median forecast for 1.0% growth. The data accompanies recent BoC policymaker guidance emphasizing that there is no rush to continue with its gradual tightening cycle. USD-CAD has resistance at 1.2730-35 (being tested), and support at 1.2678-80.

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