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By XE Market Analysis November 27, 2014 3:14 am
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    XE Market Analysis: Europe - Nov 27, 2014

    The dollar maintained a softer tone that was established after the round of soft data out of the U.S. yesterday, while firm capital expenditure numbers out of Australian aided the greenback lower in the case against the Aussie. EUR-USD saw a narrow range, though managed to recover from a dip below 1.2500. Yesterday's peak at 1.2531 was left unchallenged. USD-JPY posted an 11-day low at 117.26, while AUD-USD clocked a two-day high at 0.8609. Trading conditions were thin, and are likely to remain so due to the U.S. Thanksgiving holiday today.

    [EUR, USD]
    EUR-USD saw a narrow range, though managed to recover from a dip below 1.2500, reflecting generally dollar weakness after a round of weak data out of the U.S. on Thursday. We look still look for an eventual move on the July 2012 low at 1.2042 due to diverging Eurozone and U.S. economic growth, and so look to sell into rallies. Resistance is marked at 1.2531, 1.2568-78, and key resistance is seen at 1.2600. Support is at 1.2480 (20-day moving average), 1.2443-45, and 1.2358 (Nov-6 low), which is the lowest level traded since August 2012.

    [USD, JPY]
    USD-JPY posted an 11-day low at 117.26 amid a generally softer dollar. Bigger picture, the pair still looks to be 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 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 near 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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