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By XE Market Analysis January 17, 2018 7:05 am
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    XE Market Analysis: North America - Jan 17, 2018

    The USD index (DXY) has lifted out a of a fresh low that was seen early in the Asia-Pacific session at 90.14. That is the lowest level seen since December 2014, and was the culmination of a 13.2 decline from the high seen in January 2017. The low also marks about a 55% retracement of a rally seen from 2013-14 through to last January, illustrating the corrective aspect of dollar declines over the last year. The prevailing rebound has been driven by a correction in EUR-USD, which has declined by a big figure from the 37-month posted earlier at 1.2323.

    [EUR, USD]
    EUR-USD came off the boil after posting a 37-month high at 1.2323, subsequently retreating to the lower 1.22s. The dynamic was driven by swings in the dollar today, while a degree of caution about the euro has entered market narratives with some ECB policymakers having expressed concern about the pace of recent gains in the common currency, while concerns remain about the risk of coalition talks in Germany failing. EUR-USD reportedly has sell stop orders clustered around 1.2180-90.

    [USD, JPY]
    USD-JPY posted a new four-month low at 110.19 in the early Tokyo session, completing a run of seven consecutive down sessions, before recouping to the upper 110.0s. The move was driven by broader dollar movement, with the buck posting fresh lows versus other currencies before rebounding some. The price action in USD-JPY today in Asia was similar to that seen in Tokyo trading yesterday, when the pair lifted from sub 110.50 levels to near 111.00. The 110.00 level is reportedly seen as a major support level by Japanese corporations, being near to the Tankan survey's consensus forecast rate, a view strengthened after remarks of disquiet, yesterday, about yen strength from both finance minister, Aso, and the economy minister, Motegi. USD-JPY has resistance at 111.05-7, and support is at 110.00.

    [GBP, USD]
    Cable logged a new post-Brexit peak at 1.3837 before retreating to the mid-to-upper 1.37s as the dollar posted a broader rebound. The pound has been trading comparatively more neutrally versus the euro, yen and other currencies. Yesterday's expected dip in headline UK CPI in December, to 3.0% y/y from 3.1%, fitted BoE projections and had little impact on sterling markets. PM May yesterday felt the need to affirm yesterday that the UK would definitely be leaving the EU on 29th March 2019 in response to remarks by Donald Tusk, the president of the European Council, who said that the EU is open to Britain having a "change of heart." The UK's Chancellor, Hammond, meanwhile, assured that the government does not have any direct exposure to the bankruptcy of Carillion, a major construction company that the government has used for outsourcing. The drop in Cable today has tracked the decline in EUR-USD. Cable's former resistance zone, marked by cluster of recent daily highs at 1.3577-86, now reverts as a support.

    [USD, CHF]
    EUR-CHF has settled to the mid 1.17s after clocking a new 37-month high at 1.1833 on Monday. The cross has been on a broadly upward path since mid last year, reflecting economic recovery in the Eurozone, alongside the apparent passing of the worst of the existential political threats to the Euro area. The SNB's punitive -0.75% deposit rate has also been in the mix of directional drivers. EUR-CHF would need to reach 1.2000 to fully reverse the losses that were seen after the SNB abandoned the franc cap in January 2015, which is something we anticipate will be achieved in the coming months.

    [USD, CAD]
    USD-CAD has maintained a consolidation in the mid 1.24s over the last two sessions, in today's BoC policy meeting and announcement. The pair lifted out of an eight-day low that was seen just under 1.2400 after a short-lived dip yesterday. A broader retreat in the U.S. dollar coupled with Loonie-supporting reports of a possible breakthrough in NAFTA negotiations (Axios reported over the weekend that Trump is softening on it), had been weighing on USD-CAD. Focus will remain on the NAFTA negotiations, with uncertainty about this having curtailed the Canadian dollar rallying amid the surge in oil prices and expectations for the BoC to hike interest rates by 25 bp this Wednesday. USD-CAD has support at 1.2397-1.2400, ahead of trend support at 1.2346-47. Resistance is at 1.2457-60.

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