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By XE Market Analysis November 26, 2018 4:04 am
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    XE Market Analysis: Europe - Nov 26, 2018

    Both the Dollar and Yen lose ground to most other currencies, especially the Dollar bloc currencies, which rebounded concurrently with a revival in risk appetite, with oil prices staging a partial rebound of last week's sharp losses and equity markets rising. EUR-USD lifted to around 113.60, up from an 11-day low at 113.26, while USD-JPY rose to a 10-day high at 113.29 as the Japanese currency underperformed in shedding some of its safe haven premium. AUD-JPY has been the biggest mover of the day do far, rising up over 0.5% in printing a five-day high at 82.17. AUD-USD lifted by 0.4%, to a four-day high at 0.7258. USD-CAD tipped back under 1.3200, nearing Friday's low at 1.3186. Sterling has been trading neutrally, with Cable settled in the in the lower 1.2800s and EUR-GBP in the mid 0.8800s, despite news that the EU-27 approval a Brexit deal with the UK on Sunday, with the problem being that it still looks highly uncertain whether the "worst of both worlds" deal will be passed in the UK's parliament.

    [EUR, USD]
    EUR-USD lifted to around 113.60, up from an 11-day low at 113.26. EUR-JPY also gained, as both the Dollar and Yen underperformed most other currencies. We still see EUR-USD as being in the bear trend that's been in play since April, although downside momentum has been waning in recent weeks, aid by the Fed signalling a pause in its tightening cycle from next spring. Signs of flagging growth momentum in the Eurozone (the latest being last Friday's release of flash estimates of the November PMI surveys) and a back-and-forth process between Brussels and Rome over the budget planning of Italy's populist government remain negatives for the Euro, however. Brexit also remains a wildcard risk. The EU-27 voted in favour of the Brexit plan agreed between the UK government and Brussels but it remains highly uncertain whether it will pas in Britain's parliament, and markets continue to factor in a risk of there being a lose-lose no-deal Brexit scenario (which we think very unlikely as most members of parliament are staunchly against this). EUR-USD has support is at 1.1320-22, and resistance 1.1406-08.

    [USD, JPY]
    USD-JPY has rallied amid a revival in risk appetite, with oil prices staging a partial rebound of last week's sharp losses and equity markets rising. The pair rose to a 10-day high at 113.29. AUD-JPY rose by a larger magnitude in making a five-day high at 82.17. USD-JPY's fundamentals (yield differentials and the associated contrast between Fed and BoJ policy paths) remain supportive, though periodic episodes of risk aversion have been an intermittent offsetting bearish force. USD-JPY has resistance at 113.31-34, and support at 112.60-63.

    [GBP, USD]
    Sterling has been trading neutrally, with Cable settled in the in the lower 1.2800s and EUR-GBP in the mid 0.8800s, despite news that the EU-27 approval a Brexit deal with the UK on Sunday, with the problem being that it still looks highly uncertain whether the "worst of both worlds" deal will be passed in the UK's parliament. Markets continue to factor in a risk of there being a lose-lose no-deal Brexit scenario, which we think very unlikely as most members of parliament are staunchly against this. UK parliament will debate and vote on the deal in early December. Should parliament vote it down, the government will have not choice but to return the issue to the people with either a general election or, more likely, another referendum, which would likely ask where to have a "hard" Breixt or remain in the EU. EUR-USD has support is at 1.1320-22, and resistance 1.1406-08.

    [USD, CHF]
    EUR-CHF has recouped to the lower 1.1300s steadied after dropping sharply to a two-month low at 1.1297 last week. A renewed spike in Italian yields amid ongoing wrangling between Roma and Brussels about Italy's budget had weighed on the common currency, reviving the Franc as a safe-haven currency. There has also been flagging economic growth momentum in the Eurozone. EUR-USD has support at 1.1300-05.

    [USD, CAD]
    USD-CAD tipped back under 1.3200, nearing Friday's low at 1.3186. A 1%-plus rebound in oil prices, and a broader revival in risk appetite in global markets have helped the Canadian currency and other Dollar bloc currencies find a footing. USD-CAD has support at 1.3163-65, and resistance at 1.3236-40.

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