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By XE Market Analysis December 5, 2017 7:09 am
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    XE Market Analysis: North America - Dec 05, 2017

    The dollar has lacked direction so far today, while sterling remained under pressure and the dollar bloc units outperformed, led by the Australian dollar following an above-forecast retails sales report out of Australian, which was subsequently backed-up by a comparatively less-dovish statement from the RBA governor after the December policy meeting left the cash rate at 1.5% for a 16th consecutive month. AUD-USD carved out a three-week high of 0.7653, and AUD-JPY gained by nearly 1% in rallying to around the 86.20 mark. The yen market was non too perturbed by mostly lower stock markets in Europe and Asia, which were afflicted by a resumption in the global tech sector selloff. USD-JPY ground above 112.50, but remained well off yesterday's nine-day high at 113.08. USD-CAD, which has been on a downward path since last Friday's release of forecast-busting Canadian GDP and employment data, edged out a six-week low of 1.2651. EUR-USD, meanwhile, maintained a narrow range around 1.1865-75. The pound remained under pressure after PM May disappointed expectations by saying that the EU and UK aren't quite ready to agree on divorcing terms, which was followed up by a much weaker than expected services PMI out of the UK.

    [EUR, USD]
    EUR-USD has orbited the 1.1850 level, swinging lower during a patch of dollar buying to an intraday low of 1.1842 before swinging back above 1.1860. As-expected final November PMI readings out of the Eurozone, and unexpected weakness in Eurozone retail sales (which is seen more of a blip than a trend given rising employment and confidence readings in the Eurozone) have cast only a limited impact on the euro. Across the pond, the focus remains on the Republican tax reform effort and the encroaching debt ceiling deadline, along with today's trade and non-manufacturing ISM survey. EUR-USD has remained within yesterday's range, and the pair is trading near the midway point of the range that's been seen over the last three months. We anticipated the broadly sideways chop will continue for now. Resistance is at 1.1905-10, support at 1.1814-15.

    [USD, JPY]
    USD-JPY lifted marginally in Tokyo before slumping back to near net unchanged levels around 112.50 during the London AM session. Higher U.S. Treasury yields helped provide something of an underpinning for the pairing in the face of generally lower stock markets in Asia and Europe, which were afflicted by a resumption in the global tech sector selloff (led by the Nasdaq, which closed on Wall Street yesterday with a loss of just over 1%). AUD-JPY buying was seen following above-forecast retail sales data out of Australia, which was followed by a comparatively less dovish statement from the RBA governor following today's policy meeting that left the cash rate unchanged at 1.5%. The cross lifted by almost a big figure to around 86.20. USD-JPY has remained well off yesterday's nine-day high at 113.08. We see the pairing as having entered a choppy, net sideways phase, centred around 112.00 to 115.00, with medium term risks to the upside given the potential for a sustained upward ascent in U.S. Treasury yields. Support is at 112.35-37 and resistance is at 113.27-30.

    [GBP, USD]
    The pound remained under pressure after PM May disappointed expectations by saying that the EU and UK have yet to reach an accord on divorcing terms, although she also said that she was confidence that a positive announcement would be likely by the end of the week. UK chancellor Hammond followed up today by saying that he was "very optimistic" that a deal would be struck this week. Also in the mix was today's release of the UK November services PMI survey, which was markedly disappointing, falling to 53.8 in the headline reading, down from 55.6 in October. The median forecast had been for a much more modest decline, to 55.0. This weighed on the composite PMI, which fell to a 54.9 reading from 55.8 previously, with the underperformance of the service sector more than offsetting the above-forecast improvements in both the construction and manufacturing PMI surveys this month (sectors which together account for little more than 20% of the UK economy). Cable logged a four-session low of 1.3370 ahead of the services PMI, subsequently settling around 1.3420 after recovering from a brief post-PMI dip. Sterling market participants will remain on tenterhooks for an announcement that the divorce terms have been agreed, as this would greenlight the commencement of post-Brexit trading terms. Cable has support at 1.3370, and resistance is at 1.3500.

    [USD, CHF]
    EUR-CHF has seen volatile price action over the last sessions, having on Friday turned sharply lower, to a low of 1.1599 after clocking a 35-month high of 1.1737, and subsequently, yesterday and today, lifting back above 1.1690. There have been multiple failures to sustain gains above 1.1700 over the last month, Friday being the latest, and market participants will be wary of supply above 1.1700. We remain bullish over the medium term, however. Assuming the Eurozone has conquered, or can conquer, existential political threats, and assuming the SNB remains anchored to ultra-accommodative monetary policy, which looks likely to be the case for the foreseeable, we anticipate EUR-CHF will make an eventual return to 1.2000. Support is at 1.1650.

    [USD, CAD]
    USD-CAD, which has been on a downward path since last Friday's release of forecast-busting Canadian GDP and employment data, edged out a six-week low of 1.2651. The brighter fundamental picture in Canada has offset the softer tone in oil prices. USD-CAD has trend support at 1.2614-25, and resistance at 1.2727-30.

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