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By XE Market Analysis November 26, 2014 3:43 am
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    XE Market Analysis: Europe - Nov 26, 2014

    Narrow ranges have prevailed among the dollar majors. USD-JPY managed to eke out a two-day low at 117.59 after peaking at 117.93 in Tokyo, finding a footing amid reports of Japanese investor demand. EUR-USD posted a 1.2465-84 range, consolidating the gain seen after Monday's low at 1.2362. The OECD yesterday called on the ECB to consider QE to fight deflation risks, which will support the doves at the central bank and should help maintain the overall downside bias of the euro. Cable oscillated on either side of 1.5700. BoE's Haldane said in an interview with the Bristol Post that markets are discounting in the first rate hike in late 2015, amid generally balanced-to-dovish remarks. AUD-USD managed to rebound moderately after making a three-and-a-half year low yesterday, at 0.8513, clocking an intraday peak of 0.8565. Weak Australian Q3 construction work data was overlooked, which fell 2.2% q/q.

    [EUR, USD]
    EUR-USD posted a 1.2465-84 range, consolidating the gain seen after Monday's low at 1.2362. We don't expect recent euro gains to sustain. The OECD yesterday called on the ECB to consider QE to fight deflation risks, which will support the doves at the central bank and should help maintain the overall downside bias of the euro. Support is marked by the Nov-6 low at 1.2358, which is the lowest level traded since August 2012, and resistance is at 1.2489-90. 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 managed to eke out a two-day low at 117.59 after peaking at 117.93 in Tokyo, finding a footing amid reports of Japanese investor demand. The pair is consolidating after making a seven-year peak at 118.97 last Friday. 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 looks to have found equilibrium in the mid-to-upper 1.50s after a four-month bear trend from the July peak at 1.7192. Resistance is marked at 1.5735 and 1.5736 (12-day high), support at 1.5625-28 and 1.5590 (thirteen-month low, made Nov-19).

    [USD, CHF]
    EUR-CHF has continued to trade 1.2020. The cross lifted from the 1.2010 area 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 recently pledged that the 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 back below 1.1300, with the Loonie benefitting 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 1.1230-35.

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