Home > XE Currency Blog > XE Market Analysis: North America - Jan 11, 2019

AD

XE Currency Blog

Topics6376 Posts6421
By XE Market Analysis January 11, 2019 6:39 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4368
    XE Market Analysis: North America - Jan 11, 2019

    The Dollar has been trading on a softer footing. EUR-USD has settled back 1.1500 after Fed's Clarida said that the central bank can afford to be patient, further affirming the shift-to-neutral change at the U.S. central bank, though the pair has remained below yesterday's three-month peak at 1.1570. We're not overly bullish of EUR-USD, despite the dollar-weakening Fed shift to a neutral-from-hawkish policy stance, given signs of flagging growth momentum in the Eurozone and given the risk of a disorderly no-deal Brexit scenario (although this is not our central view), which would have ramification for the Eurozone economy. ECB's Villeroy said earlier that downside risks to the outlook have increased while reaffirming a wait-and-see policy stance. USD-JPY has been trading in the low-to-mid 108.0s, holding below yesterday's 108.51 peak. The pairing is being held back by an overall soft track in the Dollar, while the Yen has in the meanwhile lost ground to the Dollar bloc currencies, which have returned to outperformance mode amid a backdrop of rising global equity markets. News that China's Vice Premier is to travel to Washington DC for trade talks has been tonic for investors, offsetting news that Beijing will lower its 2019 GDP growth target from 6.5% to 6.0%. AUD-USD printed a one-month high at 0.7235, and NZD-USD a three-week peak at 0.6840.

    [EUR, USD]
    EUR-USD has settled back 1.1500 after Fed's Clarida said that the central bank can afford to be patient, further affirming the shift-to-neutral change at the U.S. central bank, though the pair has remained below yesterday's three-month peak at 1.1570. We're not overly bullish of EUR-USD, despite the dollar-weakening Fed shift to a neutral-from-hawkish policy stance, given signs of flagging growth momentum in the Eurozone and given the risk of a disorderly no-deal Brexit scenario (although this is not our central view), which would have ramification for the Eurozone economy. ECB's Villeroy said earlier that downside risks to the outlook have increased while reaffirming a wait-and-see policy stance. EUR-USD has support at 1.1490-92, and resistance at 1.1610-13 (levels which encompass the current position of the 100-week moving average).

    [USD, JPY]
    USD-JPY has been trading in the low-to-mid 108.0s, holding below yesterday's 108.51 peak. The pairing is being held back by an overall soft track in the Dollar after Fed's Clarida said that the central bank can afford to be patient, and see how data evolves. The Yen has in the meanwhile lost ground to the Dollar bloc currencies, which have return to outperformance mode amid a backdrop of rising global equity markets. News that China's Vice Premier is to travel to Washington DC for trade talks has been tonic for investors, offsetting news that Beijing will lower its 2019 GDP growth target from 6.5% to 6.0%. A Japanese December survey also saw an underwhelming current conditions indicator, which fell to 48.0, off the 50.7 median forecast. USD-JPY has support at 108.14-15.

    [GBP, USD]
    The Pound has remained in a directional stasis in trade-weighted terms as market participants wait for Tuesday's UK Parliament vote on the EU Withdrawal Agreement and outline for a future relationship. The leader of the principal opposition party, Labour, has called for a general election in the event that the deal is voted down, which is looking highlight likely to be the case. However, a general election is almost certain not to happen as the ruling Conservative and DUP parties won't want this, having over three years left before an election is due. Of all the possible scenarios that will open up at point that the government's Brexit deal is voted down, our best guess is that a new EU referendum will be the path of least resistance, despite elevated media talk and preparations for a no-deal Brexit scenario. We think a no-deal scenario is unlikely given the overwhelming majority of MPs are against allowing this to happen. Cable has support at 1.2709-10, and resistance at 1.2800.

    [USD, CHF]
    EUR-CHF has lifted back above 1.1300, printing a near three-week high at 1.1335. The move was driven by a bout of across-the-board franc selling, which came amid rumours of SNB intervention, which, if this was the case, would look to have been tactically timed to be in concert with the improved risk appetite in global markets. The cross had last week punched out a four-month low at 1.1184, which was seen as the Swiss currency picked up safe haven demand amid a bout of turmoil in global markets. The SNB remained firmly on hold at its quarterly policy meeting last month, continuing to rely on the combination of negative interest rates and the threat of intervention to limit appreciation in the currency.

    [USD, CAD]
    USD-CAD has remained heavy, today pushing back to the five-week low seen earlier in the week at 1.3179. The Fed's shift to a neutral-from-hawkish policy stance has been driving the pair's downside bias, along with the recuperation in risk appetite in global markets, which has been benefiting the Canadian currency by lifting oil prices. USD-CAD resistance at 1.3200-04, which encompasses the prevailing position of the 100-day moving average.

    Paste link in email or IM