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By XE Market Analysis December 19, 2018 7:06 am
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    XE Market Analysis: North America - Dec 19, 2018

    The Dollar remained on a softening tack, printing fresh lows against some currencies, including both the Yen and the Euro, the latter of which has been the chief beneficiary of the softer U.S. currency. EUR-USD edged out a fresh nine-day high of 1.1414, which surpasses yesterday's peak by 13 pips. EUR-JPY, EUR-GBP and EUR-CHF, among other euro crosses, concurrently posted gains. A drop in Italian yields have shored up euro sentiment. This comes with markets anticipating the Fed is widely expected to accompany a widely expected 25 bp rate hike with dovish spin in policy guidance. USD-JPY touched a fresh seven-week low at 112.19 in early Tokyo trading, subsequently settling to the 112.30-50 area. Stock markets have rallied in Europe after a lacklustre, mixed session across Asia-Pacific bourses, while S&P 500 futures are showing a gains of almost 1% in the overnight session following a flat performance on Wall Street yesterday. Cable continued to make time in the mid-to-upper 1.2600s, holding in a consolidation pattern after a phase of sharp losses left a 20-month low at 1.2476 last week. UK November inflation data met expectations, rising 2.3% y/y in the headline CPI figure. USD-CAD has settled in the mid 1.3400s, down from the 18-month high the pair yesterday, at 1.3497, which was seen concomitantly with fresh major-trend lows in oil prices.

    [EUR, USD]
    EUR-USD edged out a fresh nine-day high of 1.1414, which surpasses yesterday's peak by 13 pips. A mixture of broader Euro firmness and broader Dollar weakness has been seen. EUR-JPY, EUR-GBP and EUR-CHF, among other euro crosses, have concurrently been posting gains, while the dollar has also been softening versus most currencies. A drop in Italian yields have shored up euro sentiment, while markets are anticipating the Fed is widely expected to accompany a widely expected 25 bp rate hike with dovish spin in policy guidance. EUR-USD has been in a bear trend since April, although downside momentum has been abating in recent weeks. We still take an overall bearish view of the pairing based on the expected relative strength of the Eurozone and U.S. economies. Trend resistance, draw from wave highs seen over the last six weeks, comes in at 1.1408-10. Support comes in at 1.1360-62.

    [USD, JPY]
    USD-JPY touched a fresh seven-week low at 112.19 in early Tokyo trading, subsequently settling to the 112.30-50 area. Stock markets in Asia have been mixed, while S&P 500 futures are showing a gain of 0.6% in the overnight session following a flat performance on Wall Street yesterday. USD-JPY has support at 112.19-23, and resistance at 113.00. 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]
    Cable continued to make time in the mid-to-upper 1.2600s, holding in a consolidation pattern after a phase of sharp losses left a 20-month low at 1.2476 last week. UK November inflation data met expectations, rising 2.3% y/y in the headline CPI figure and by 1.8% on the core CPI reading, ticking down from respective October figures of 2.4% y/y and 1.9%. These were the same as the median forecasts, and Sterling markets were unmoved. The BoE's Monetary Policy Committee is in meeting, and will announce tomorrow. No policy changes are expected, and there are unlikely to be much change in guidance so close after last month's quarterly Inflation Report, especially with Brexit uncertainty having put monetary policy in limbo. All Brexit bets look to be off until the new year. The London interbank market has entered into the Christmas doldrums, and the UK Parliament is winding down for the Christmas recess (much to the chagrin of a portion of the public, who wanted the government to put the Withdrawal Agreement deal to vote before the break). The parliamentary vote on the Brexit deal and outline for a future relationship will take place in the week of January 14, before the legislated deadline of January 21. Our best guess remains that Parliament will vote down the deal and, of all the possible scenarios at that point, that a new EU referendum will be the path of least resistance. It remains a possibility that the UK will remain in the EU, which polls suggest would be the case if there were to be a "remain" option in a new referendum, which, in this eventually, would likely spark a 10%-15% surge in the pound. We think a no-deal scenario is unlikely as most of the key players on both sides of the channel want to avoid this.

    [USD, CHF]
    EUR-CHF has settled near the 1.1300 level. The cross remains comfortably above the two-and-a-half month low seen last Tuesday at 1.1225. The SNB remained firmly on hold at its quarterly policy meeting this month, 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 settled in the mid 1.3400s, down from the 18-month high the pair yesterday, at 1.3497, which seen concomitantly with fresh major-trend lows in oil prices. WTI crude futures hit a low of $45.79 yesterday, which is the lowest level seen since August 2017. We remain bullish of USD-CAD. Support comes in at 1.3445-50..

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