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By XE Market Analysis December 10, 2018 7:24 am
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    XE Market Analysis: North America - Dec 10, 2018

    The Dollar and Yen have, by varying degrees, traded generally softer against most other currencies, with the main exception being Sterling, which has come under pressure as markets fear fresh political uncertainty in the UK after what is expected to be a failed parliamentary vote tomorrow on the EU Withdrawal Agreement. The Pound was showing at the lows heading into the New York interbank open, showing respective declines of 0.7% and 0.8% against the Dollar and Euro, and just over a 0.5% loss with respect to the Yen. EUR-GBP printed a 10-week high at 0.8992, Cable traded back under 1.2700. EUR-USD, meanwhile, posted a three-week high at 1.1442, while the Dollar lost ground to the Dollar bloc currencies as equity markets in Europe and S&P 500 futures pared intraday (or intranight, in the case of the latter) losses. Oil prices rallied by over 1.5% on news that OPEC agreed to curtail production by 1.2 mln barrels per day. USD-JPY ebbed by about 40 pips in making a two-session low at 112.24 in earlier Tokyo trade, and subsequently settling above 112.50 during the European AM session. Last Thursday's six-week low at 112.23 was left unchallenged. AUD-JPY still printed a six-week low at 80.72 before rebounding back above 81.40. The Yen had initially found support from a backdrop of hefty stock market declines in Asia, then weakened as stock market sentiment improved.

    [EUR, USD]
    EUR-USD was showing an intraday gain of 0.5% in printing a three-week high at 1.1442. The pair has been in a bear trend since April, although downside momentum has abated in recent weeks, gaining amid a soft Dollar profile as Fed policy expectations are recalibrated. We still take an overall bearish view of the pairing. The U.S. economy remains strong, even if the Fed's tightening course is heading for a pause. Conviction for eventual ECB tightening has concurrently faded with the Eurozone economy losing momentum. The Eurosceptic populist movement gripping parts of the Eurozone, to which Italy's budget-planning woes and the Brexit mess are symptoms, also remains a concern. EUR-USD has support at 1.1406-08, resistance at 1.1472-75.

    [USD, JPY]
    USD-JPY ebbed by about 40 pips in making a two-session low at 112.24, subsequently settling around 112.40. Last Thursday's six-week low at 112.23 was left unchallenged. Most Yen crosses also dipped during the early Asia-Pacific session, although most more than recovered intraday losses, unlike USD-JPY. AUD-JPY still printed a six-week low at 80.72 before rebounding back above 81.20. The Yen found support from a backdrop of hefty stock market declines in Asia. S&P 500 futures have also declined 0.7%, pointing to a bad start to the new street on Wall Street after was the worst week for U.S. equity markets since March. U.S-China relations continued to dog sentiment. There were reports that China's foreign minister summoned the U.S. ambassador in Beijing in protest over last week's arrest of Huawei's CFO. In data, Japan's Q3 GDP (final) came in much worse than expected, contracting 0.6% q/q, twice as worse as the preliminary reading. The y/y figure was -2.5%. China's November trade data showed both exports and imports missing median forecasts, with copper imports, a metric that correlates with global growth, falling for the first time in 2018. USD-JPY has resistance at 112.62-65, and support at 112.14-16.

    [GBP, USD]
    Sterling has come under pressure, which has propelled EUR-GBP to a 10-week high at 0.8992, while also underperforming an otherwise weak Dollar, too, driving a modest loss in Cable, to the 1.2700 area. Markets are bracing for tomorrow's Brexit vote in the UK parliament, which the prime minister has affirmed will be taking place despite reports of it being delayed, and which is widely expected to see the government's Brexit deal voted down. Labour, the Liberal Party, Northern Ireland's DUP, Scotland's SNP, and significant numbers of Conservative Party members (mostly from the Eurosceptic cabal, but also some Remainers) are all set to vote against it. If the deal is rejected, it would create scope for multitude scenarios depending on how big the defeat is. For now, this should keep the Pound a sell-on-gains trade. Cable has resistance at 1.2781-83.

    [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. The SNB conducts its next quarterly policy review this week (Thursday). The central bank has been continuing to tread carefully amid heightened uncertainty about the economic outlook, geopolitical risks and protectionist threats. Recent market volatility and Brexit risks will do little to change the SNBs stance, and we expect the central message to remain that the situation remains fragile and the currency "highly valued." So the SNB widely expected to keep policy unchanged at December meeting while continuing to focus on a negative rate policy and ad hoc currency intervention. Under the circumstances, rate hikes are unlikely to be on the agenda for a long time to come.

    [USD, CAD]
    USD-CAD has settled near 1.3300, down from last week's 18-montjh high at 1.3445. A rebound, or at least steadying, in oil prices after OPEC agreed on a 1.2 mln barrel per day output cut, along with Friday's sub-forecast U.S. jobs report, have fostered a corrected in USD-CAD. Overall, we continued to take a bullish view. The pair has resistance at 1.3340-43, and support at 1.3265-67.

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