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By XE Market Analysis December 7, 2018 6:20 am
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    XE Market Analysis: North America - Dec 07, 2018

    The Dollar majors have seen narrow ranges so far today as market participants collectively sit on their hands into the U.S. employment report release. The Yen saw some of its safe haven premium unwind, concomitantly with a rebound in global stock markets, although S&P 500 futures are showing a 0.5% loss while the Australian Dollar and other Dollar bloc currencies have remained heavy. EUR-USD has been plying a narrow range so far today to near the midday way of yesterday's range, around 1.1365-70, which is also roughly the midway point of the choppy range that's been unfolding over the last week and more. USD-JPY has settled in the 112.00s, up from the six-week seen at 112.23 during the late London PM yesterday. EUR-JPY, and most other Yen crosses have seen a similar price action, which reflects a tentative unwinding of safe-haven positioning. Trump cited a Beijing statement on Twitter, that "'We are full of confidence that an agreement can be reached within the next 90 days,'" adding "I agree," although Trump's overt attempts to bring China to heel, and the arrest of Huawei CFO on an alleged breach of Iran sanctions, suggests that Beijing will remain noncompliant to White House demands. As for the U.S. November payrolls report, we expect a 215k rise (median 200k) in the headline, a 0.2% rise in hourly earnings (median 0.3%)and an unchanged jobless rate of 3.7% (median same).

    [EUR, USD]
    EUR-USD has been plying a narrow range so far today to near the midday way of yesterday's range, around 1.1365-70, which is also roughly the midway point of the choppy range that's been unfolding over the last week and more. While the pronounced drop in U.S. yields and associated recalibration in Fed policy expectations has been a bearish force on the Dollar, the U.S. currency also found some demand of late as a safe haven currency. There has been offsetting declines in bund yields, which have ebbed to the lowest levels seen since April 2017. This backdrop has netted directional bias in EUR-USD. The pairing has been in a bear trend since April, and while downside momentum has abated in recent weeks, we still take an overall bearish view. The U.S. economy remains strong, which should be evidenced by today's release of the U.S. November payrolls report, where we expect a 215k rise in the headline, while growth momentum in the Eurozone is flagging. There is also the spectre of the Eurosceptic populist movement in Europe, to which Italy's budget-planning woes and the Brexit mess are symptoms, which is demanding a discount in the Euro.

    [USD, JPY]
    USD-JPY has settled in the 112.00s, up from the six-week seen at 112.23 during the late London PM yesterday. EUR-JPY, and most other Yen crosses have seen a similar price action, which reflects a tentative unwinding of safe-haven positioning following a late-session rebound on Wall Street and steadying in stock markets across Asia after yesterday's outsized losses. Trump cited a Beijing statement on Twitter, that "'We are full of confidence that an agreement can be reached within the next 90 days.' I agree," which helped to allay investor concerns of an entrenching trade war. USD-JPY has lifted back to near its 50-day moving average at 112.95. Support comes in at 112.49-50.

    [GBP, USD]
    The pound came under moderate pressure earlier, which pushed Cable back under 1.2750 and lifted EUR-GBP to a two-day high, though the UK currency has already appeared to have found a footing with the sterling market remaining non-committal ahead of the parliamentary made-or-break vote on the government's Brexit deal. It continues to look highly likely that the deal will be voted down, which would immediately create potential for multitude scenarios in the coming weeks, which have been widely reported on by the UK media this week. This makes taking a directional bet, or hedge, difficult with regard to the pound. Cable has support 1.2730-33, and resistance at 1.2789-91. The latter levels encompass the prevailing position of the 20-day moving average.

    [USD, CHF]
    EUR-CHF has ebbed back under 1.1300 after come choppy price action in recent sessions. The cross has support at 1.1260-61.

    [USD, CAD]
    USD-CAD has settled in the upper 1.3300s, consolidating recent gains which yesterday left an 18-monht high at 1.3445. The pair is set for its biggest weekly advance since June. The 30%-plus dive in oil prices over the last couple of months has consequences for Canada's terms of trade and, by association, the BoC policy outlook, with the central bank this week obliged to give dovish-leaning guidance. The BoC noted a "materially weaker" than expected energy sector and signs that trade conflicts are weighing more heavily on global demand. The central bank also said there "may be additional room for non-inflationary growth." Oil prices look set to head lower, too, with OPEC failing to detail output quotes as its Vienna meeting yesterday. A safe haven dynamic has also been buoying the U.S. currency, despite lower Treasury yields amid an ongoing recalibration of Fed policy expectations, where markets are now discounting a pause in the cycle following a hike this month. Today's focus will fall on the dual releases of U.S. and Canadian November employment reports will be prime focus today. We expect a solid 215k headline gain in the U.S. and a 15.0k rise in Canada. As-expected data won't likely cast must influence on USD-CAD, which we expect to trend higher. The pair has support at 1.3340-43.

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