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By XE Market Analysis December 14, 2018 7:00 am
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    XE Market Analysis: North America - Dec 14, 2018

    The Dollar has traded firmer against mot other currencies, the Yen being the main exception, with USD-JPY having held steady in the mid 113.0s. Driving were weakness in Dollar block currencies, amid a backdrop of tumbling stock markets and sub-forecast Chinese retail sales and production data, and specific weakness in both the Euro and Pound. EUR-USD has posted its biggest drop of the month so far, falling over 0.6% in making a 16-day low at 1.1286. EUR-JPY concurrently printed an eight-day low and EUR-CHF has tumbled back toward recent two-and-a-half-month lows. The Euro selling catalyst was disappointing preliminary December PMI data out of the Eurozone, where the composite reading fell to a 49-month low of 51.3, down quite sharply from November's 52.7 reading. This data feeds the narrative in markets of a Eurozone economy losing growth momentum, which coupled with concerns about the various populist political movements in Europe, of which the riots in France, budget planning woes in Italy and Brexit are all symptomatic of, is making the Dollar a preferable alternative to the euro, despite the recent recalibration in Fed policy expectations. Sterling, meanwhile, posted a two-day low against the Dollar at 1.2567, extending the correction from yesterday's three-day peak at 1.2687. The Pound also softened against other currencies on news that EU leaders said that the terms of the Withdrawal Agreement were not open for renegotiation, affirming that the deal is likely headed for eventual failure in the UK's Parliament.

    [EUR, USD]
    EUR-USD has posted its biggest drop of the month so far, falling over 0.6% in making a 16-day low at 1.1286. EUR-JPY concurrently printed an eight-day low and EUR-CHF has tumbled back toward recent two-and-a-half-month lows. The Euro selling catalyst was disappointing preliminary December PMI data out of the Eurozone, where the composite reading fell to a 49-month low of 51.3, down quite sharply from November's 52.7 reading. This data feeds the narrative in markets of a Eurozone economy losing growth momentum, which coupled with concerns about the various populist political movements in Europe, of which the riots in France, budget planning woes in Italy and Brexit are all symptomatic of, is making the Dollar a preferable alternative to the euro, despite the recent recalibration in Fed policy expectations. EUR-USD has been in a bear trend since April, although downside momentum has abated in recent weeks. We still take an overall bearish view of the pairing. EUR-USD has resistance at 1.1347-59, and support at 1.1260-62.

    [USD, JPY]
    USD-JPY has traded softer, as have most Yen crosses, such as AUD-JPY, which printed four-day lows. This reflected a pick up in safe heaven demand for the Japanese currency as risk appetite soured after Chinese retail sales and production data undershot growth expectations, which in rekindled concerns about flagging global growth. USD-JPY posted a low at 113.42. The pair has so far remained within yesterday's 113.36-71 range. USD-JPY has support at 113.31-33, and resistance at 113.65. Bigger picture, the pairing has been oscillating in a broadly sideways range centred around 112.50-113.00 for over two months now. More of the same looks likely.

    [GBP, USD]
    Sterling posted a two-day low against the Dollar at 1.2567, extending the correction from yesterday's three-day peak at 1.2687. The Pound also softened against other currencies on news that EU leaders said that the terms of the Withdrawal Agreement were not open for renegotiation, affirming that the deal is likely headed for eventual failure in the UK's Parliament. We anticipate that the Pound with remain a sell-into-gains trade into the Parliamentary vote on the Brexit deal, which will be in January (data undecided, but before the legislated deadline of January 21). Cable has resistance at 1.2607-10.

    [USD, CHF]
    EUR-CHF has settled in the upper 1.1200s after failing to sustained a brief move above 1.1300 over the last day. The cross remains comfortably above the two-and-a-half month low seen on Tuesday at 1.1225. The SNB remained firmly on hold at its quarterly policy meeting yesterday, continuing to rely on the combination of negative interest rates and the threat of intervention to limit appreciation in the currency in times of heightened uncertainty about the global outlook.

    [USD, CAD]
    USD-CAD has remained buoyant but below last week's 18-month 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 curtailed USD-CAD's upside momentum. Overall, we continue to take a bullish view. The pair has resistance at 1.3445-50, and support at 1.3347-50.

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