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By XE Market Analysis January 15, 2019 7:14 am
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    XE Market Analysis: North America - Jan 15, 2019

    The Yen weakened and Dollar bloc currencies rallied amid a risk-back-on sentiment in markets, with Asian stock markets and U.S. equity index futures rallying after China announced the implementation of economic stimulus measures following the release of weak trade data yesterday. The measures Beijing announced include increased tax cuts. USD-JPY ebbed back some after rallying by 0.5% in printing a six-day high at 108.75. The biggest movers were AUD-JPY, NZD-JPY and CAD-JPY, which all lifted by more than 0.6%, though these crosses have also corrected from the highs. AUD-USD posted a four-day high at 0.7222. Sterling has settled back after rallying late yesterday. Markets are anticipating a resounding rejection of UK Prime Minister's Brexit deal by Parliament today (due evening time in London). EUR-USD tumbled to a one-week low at 1.1431. The low extended the decline from the three-month peak seen at 1.1570 last week. The drop today mostly reflected a rebound in the Dollar, but there have also been increasing signs of slowing growth momentum in the Eurozone.

    [EUR, USD]
    EUR-USD has tumbled to a one-week low at 1.1431. The low extended the decline from the three-month peak seen at 1.1570 last week. The high was seen following a cacophony of Fed speakers which communicated hawkish-to-neutral shift in the policy stance. Since then, concerns about a slowing Eurozone economy have weighed on EUR-USD. Support is at 1.1396-98, which marks the prevailing situation of the 50-day moving average, while resistance comes in at 1.1450. Bigger picture, the pairing has been plying a broadly sideways path for nearly three months now, roughly centred on 1.1400.

    [USD, JPY]
    USD-JPY ebbed back some after rallying by 0.5% in printing a six-day high at 108.75. The biggest movers were AUD-JPY, NZD-JPY and CAD-JPY, which all lifted by more than 0.6%, though these crosses have also corrected from the highs. The Yen's weakness was concomitant with a rally in Asian stock markets and U.S. equity index futures after China announced the implementation of economic stimulus measures following the release of weak trade data yesterday. The measures Beijing announced include increased tax cuts. We expect continued choppy price action with an overall downside bias for USD-JPY as the various challenges facing the global economy evolve -- Sino-U.S. trade dispute, less accommodative liquidity, slowing growth. The pair has resistance at 109.10-12.

    [GBP, USD]
    Sterling has settled into the Brexit vote, which will take place between 8 and 9 PM in London (15:00-16:00 ET). The House of Commons will start debating the EU Withdrawal Agreement from around 12.45pm, so there will be lots of headline churn leading up to the actual vote. All the signs are that the government is set to lose the vote by a huge margin (the BBC report by as many as 228), and there looks to be little scope for a surprise. A defeat would oblige Prime Minister May -- as legislated just last week in a sign of Parliament muscle flexing -- to return with proposals for a new way forward by January 21. This would likely lead to Parliament voting on various Plan B options, including "softer" versions of Brexit and/or a new referendum on EU membership. The future looks plural at this juncture. Our best guess remains that a new EU referendum will prove to be the path of least resistance, though how the future will look after that is another question. We do, however, think a disorderly no-deal scenario is unlikely given the overwhelming majority of MPs are against allowing this to happen. Cable is settled in the lower 1.2800s after correcting from the seven-week high seen late yesterday at 1.2931.

    [USD, CHF]
    EUR-CHF has settled back in the 1.1200s after printing a three-week high at 1.1340 last week. 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 earlier in the month 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 ebbed to a four-day low at 1.3244, with the Canadian Dollar and its Dollar bloc brethren finding support from news that China is implementing tax cuts and other measures to stimulate its economy. USD-CAD has support at 1.3214-15, and resistance at 1.3254-55.

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