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By XE Market Analysis December 8, 2017 7:15 am
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    XE Market Analysis: North America - Dec 08, 2017

    The dollar has traded generally firmer, buoyed by expectations for corporate-friendly tax reform in the U.S. and into the November payrolls report, which is expected to show fresh signs of a tightening labour market. The buck has gained 0.3% versus the euro, logging two-week highs, and advanced by a similar magnitude against the yen, making a four-week high. Gains versus the pound were relatively muted as news of a deal between the EU and UK on Brexit divorce terms gave Her Majesty's currency a lift.

    [EUR, USD]
    EUR-USD is down for a sixth consecutive session, logging a 16-day low at 1.1732. Progress in the corporate-friendly tax cuts has underpinned the dollar, while the euro itself has been fairing better against other currencies, including the yen and Swiss franc, although has lost ground to the pound following news of an accord being reaching between the EU and UK on divorcing terms. We recommend following the EUR-USD trend, with today's U.S. jobs report for November likely to provide further fodder for dollar bulls. We are expecting a 260k gain in headline employment versus the median forecast for a 198k rise. EUR-USD trend resistance comes in at 1.1783-85, and support at 1.1708-10.

    [USD, JPY]
    USD-JPY climbed for a third straight day, this time posting a 24-day high of 113.59. A strong rebound in Asian equity markets, along with a generally firmer dollar, underpinned the pairing. Progress in the corporate-friendly tax cuts underpinned Wall Street yesterday, leading to gains on Asian bourses. News that the EU and UK have reached an agreement on divorcing terms, with European Commission president, Juncker, announcing that sufficient progress has been made, has also been in the mix. USD-JPY is in an up phase within what has been a broadly sideways chop around, roughly, 108.0 to 115.00, for eight months now. More of the same looks likely. Resistance comes in at 113.73-75, and support comes in at 113.10 and 112.70.

    [GBP, USD]
    The pound is showing a modest 0.2% average gain versus the dollar, euro and yen, with the most of the gains skewed to the latter two, with the greenback itself holding up into the U.S. jobs report amid expectations for the U.S. House to pass corporate-friendly tax reforms. Agreement between the EU and UK on divorcing terms has clearly had only a muted impact on the pound, while data showing a much narrower than expected UK trade deficit in October has been dismissed, as the deficit ex "erratic commodities" in fact widened. While the divorce bill is welcome by many, the next phase of negotiations to discuss a post-Brexit trade deal will be tougher as the 27 remaining EU members won't likely be as unified in their collective position as they were with the divorce deal. And there remains the uncertainty of what Brexit will look like (whether a soft exit or hard exit). Cable logged a four-session peak at 1.3521 before ebbing back to the mid 1.34s. EUR-GBP logged a six-month low at 0.8689, since settling in the lower 0.87s. We see the cross has having entered a lower trading band, with previous trends suggesting might be marked by 0.8400 and 0.8800.

    [USD, CHF]
    EUR-CHF has seen volatile price action over the last several sessions, having on Friday turned sharply lower, to a low of 1.1599 after clocking a 35-month high of 1.1737, and subsequently testing the waters back above 1.1700. There have been multiple failures to sustain gains above 1.1700 over the last month, and market participants will be wary of supply above this level. 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 has remained buoyant after logging a five-session peak of 1.2864 yesterday. The gains have reversed most of the sharp losses that were seen last Friday following above-forecast GDP and employment data out of Canada. The BoC's cautious guidance following its policy meeting on Wednesday, when it left its policy rate at 1.0%, as had been widely anticipated, has been weighing on the Canadian buck. In particular, the BoC noted that slack remains in the labour market, despite recent rises in overall employment. We advise following USD-CAD's nascent uptrend for now. Support is at 1.2785.

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