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By XE Market Analysis December 22, 2014 6:52 am
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    XE Market Analysis: North America - Dec 22, 2014

    The EUR recovered from a 2 year low against the USD and rose against most other currencies as oil prices stabilised and the Ruble recovered on reports that China will come to the aid of the beleaguered currency. USD had strengthened during the Asian session amid speculation that the Fed may hike rates as early as April next year, while central banks in the Eurozone and Japan will maintain or even widen stimulus measures. GBP was little changed against most currencies, but gained against NOK, which slumped across the board as oil prices stabilised. CHF was slightly higher against most currencies and posted robust gains against JPY, NOK and SEK. The Yen weakened as local stock markets underperformed while AUD benefited from the rally in local stocks and NZD fell on the back of a drop in consumer confidence.

    [EUR, USD]
    EUR-USD tested the 1.2220 level, posting marginal fresh trend lows in the process. The uptick in oil prices, along with a lack of data to drive markets resulted in some short covering interest through most of the London morning. The pairing touched highs of 1.2272 before turning sideways. The Chicago Fed index and existing home sales are the only data entries on the U.S. calendar, though with U.S. equity futures indicating another higher Wall Street open, USD buyers may test the waters early.

    [USD, JPY]
    USD-JPY remained well bid, edging out a fresh nine-day high at 119.89 earlier, with subsequent dips having remained shallow. The move over Friday's 119.62 high brought a quick wave of buying to bear over the level in London, moving the pairing from 119.60 to session highs. Japanese exporter offers are expected in place from 120.00.

    [GBP, USD]
    We continue to class Cable as being in a bear trend, which has been persisting since the July cycle high at 1.7192. Resistance is now marked at 1.5684 (20-day moving average) and 1.5700, support at 1.5500. The August 2013 low at 1.5102 should be in the crosshairs of bears. The drop in UK inflation to a six-year low of 1.0% has strengthened the dovish voices at the BoE's MPC. Cable traded between 1.5665 and 1.5605 through the London morning session, and light liquidity could see the pound test the figure near term.

    [USD, CHF]
    EUR-CHF has established a 1.2025-1.2040 range after spiking to a 1.2096 peak on Thursday after the SNB implemented a negative interest rate of -0.25%. SNB member Zurbruegg recently argued that a negative interest rate would be an effective tool as permanent excess liquidity in the Swiss financial system exceeds 300 billion francs. SNB boss Jordan had said last week that upward pressure on the franc has "intensified," and the central bank said it will enforce the cap with "utmost determination" and is prepared to take further steps if necessary.

    [USD, CAD]
    USD-CAD drifted back under 1.1600 as oil prices steadied at higher levels. The pairing touched lows of 1.1579, after coming off of near 1.1610 in Asia. Early North American trade has seen a modest rally back to the highs, though with little data from either the U.S. or Canada, oil prices and risk levels may ultimately drive USD-CAD direction.

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