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By XE Market Analysis November 25, 2014 3:11 am
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    XE Market Analysis: Europe - Nov 25, 2014

    The dollar has seen a mixed performance, gaining ground against an underperforming Aussie while losing some ground against the yen, and making fractional gains versus the euro and sterling. The BoJ minutes to November 19 policy decision to boost stimulus substantially revealed mixed views on further stimulus, though many saw the risk of a delay in the end of a deflationary mind-set. USD-JPY dipped to a low of 117.69, leaving an intraday peak at 118.58. The dip swings Monday's low at 117.35 back into scope. The pair is consolidating after making a seven-year peak at 118.97 last Friday. AUD-USD dipped to a five-day low at 0.8569, which is just over 30 pips below yesterday's New York closing level. Australia's stock markets underperformed most other markets in the region once again, with the ASX 200 showing an 0.8% decline relative to the MSCI Asia Pacific's 0.1% gain. Elsewhere, EUR-USD ebbed to the 1.2420-30 area after closing in New York at 1.2037.

    [EUR, USD]
    We don't expect recent euro gains to sustain. Support is marked by the Nov-6 low at 1.2358, which is the lowest level traded since August 2012, and resistance is at 1.2445 and 1.2489-90. We look for an eventual move on the July 2012 low at 1.2042 due to diverging Eurozone and U.S. economic growth.

    [USD, JPY]
    USD-JPY dipped to a low of 117.69, leaving an intraday peak at 118.58. The dip swings Monday's low at 117.35 back into scope. The pair is consolidating after making a seven-year peak at 118.97 last Friday. The BoJ minutes to November 19 policy decision to boost stimulus substantially revealed mixed views on further stimulus, though many saw the risk of a delay in the end of a deflationary mind-set. PM Abe's rush for a new mandate for Abenomics (elections to be held Dec-14) has driven the recent across-the-board decline in the yen. We expect divergent economic and central bank policy paths between the U.S. and Japan will remain broadly supportive of USD-JPY, anticipating move on 120.00.

    [GBP, USD]
    Cable is presently in consolidation mode between the upper 1.56s and the low 1.57s A tide of BoE MPC member speak will arrive later today during regular parliamentary testimony, which we expect will be neutral-to-bearish for sterling. Resistance is marked at 1.5714 (Monday's and Friday's high) and 1.5736 (10-day high), support at 1.5625-28 and 1.5590 (thirteen-month low, made Nov-19).

    [USD, CHF]
    EUR-CHF is trading firmer, above 1.2020, after SNB's Jordan repeated his opposition to gold initiative, arguing once again that it would impede the central bank's ability to defend the 1.2000 franc cap. There are also market rumours that the SNB has effectively set up a buffer zone by lining up bids from 1.2010 to 1.2000, and Reuters has reported last week that a sizable bid was conspicuously placed on EBS at 1.2006. SNB's Zurbruegg pledged last week that that 1.2000 franc cap will be defended "with utmost determination" as the bank is prepared to buy an unlimited amount of FX and take further measures immediately if needed. Polls suggest that the "Save our Swiss Gold" initiative (referendum will take place on Nov-30) doesn't have sufficient support, which may be helping to give a EUR-CHF an underpinning.

    [USD, CAD]
    USD-CAD is trading near 1.1300. The Loonie had benefitted in the wake of the unexpected PBoC rate cut last week. We continue to expect a challenge on the major-trend high at 1.1467, however, on the back of U.S. dollar strength. The likelihood for continued soft oil prices is also a relative downer for the Canadian dollar. Resistance is marked at 1.1400 and 1.1480-1.1500, support is at 1.1260-65-1.1250.

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