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By XE Market Analysis January 23, 2018 7:15 am
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    XE Market Analysis: North America - Jan 23, 2018

    The dollar trading mostly firmer in the wake of the U.S. funding deal that ended three day's of government shutdown, although the impact was muted. The USD index (DXY) lifted out of a three-day low at 90.29 to a 90.53 high before settling just under 93.50. EUR-USD posted an intraday low at 1.2223, before recouping to around 1.2250, a level that the pair has been oscillating around for over a week now. The U.S. news has been having a greater impact on global stock markets, which scaled fresh highs, and this coursing risk-on sentiment has been serving as a negative lead for the U.S. currency as capital searches for higher beta, higher yield assets. USD-JPY has been trading heavily, with the pairing meeting decent selling into the gains that were generated in Tokyo after dovish signalling by BoJ governor, Kuroda, at his post-meeting press conference, which followed an expected unchanged policy announcement. The pair ebbed from the intraday high at 111.17, seen after Kuroda's press conference, to a low at 110.38. EUR-JPY and other yen crosses have seen a similar price action, so it's not a dollar story.

    [EUR, USD]
    EUR-USD has continued to narrowly orbit the 1.2250 level, as it has been for over a week now. The pair lifted out of the intraday low at 1.2223, which was seen during early trading in London. The Senate vote on the stopgap funding bill has only had limited positive impact on the dollar, with a burgeoning risk-on sentiment in global markets serving as a negative lead for the U.S. currency as capital searches for higher beta, higher yield assets. EUR-USD has support at 1.2182-84, while last Tuesday's 37-month high is at 1.2323 remains in the scopes.

    [USD, JPY]
    USD-JPY has been trading heavily in London dealings so far, with the pairing meeting decent selling into the gains that were generated in Tokyo after dovish signalling by BoJ governor, Kuroda. The pair ebbed from the intraday high at 111.17, seen after Kuroda's press conference, to a low at 110.58, which is 4 pips above the low seen in Tokyo ahead of the BoJ announcement. EUR-JPY and other yen crosses have seen a similar price action, so it's not a dollar story. The dollar has in fact been trading firmer against most currencies, buoyed by the Senate's stopgap vote. The yen's firmness also can't been explained by the level of risk appetite in global markets, which is red-lining in the risk-on side of the dial, which historically has been a marker for yen underperformance. One possible yen positive is news that TPP II is on course to be signed on March 9, according to Japan's economy minister, Motegi (eleven nations have been discussing this in Tokyo). USD-JPY has support is at 110.58-60, presently being tested, and resistance is at 111.48-50. A daily close below recent range lows at 110.49-54 would be a strong bearish signal.

    [GBP, USD]
    Cable logged a new post-Brexit vote high of 1.4003 before settling in the mid 1.39s after the dollar picked up on the U.S. Senate's vote on the stopgap funding bill, which ends three days of government shutdown. Cable has been starting to look ripe for a correction. The 14-day relative strength momentum indicator is flashing bearish divergence, with the indicator turning lower despite new highs in in spot prices over the last week. Mean reversion would bring the 20-day moving average, presently at 1.3695, into play.

    [USD, CHF]
    EUR-CHF has settled in the mid 1.17s, below the 37-month high that was seen last Monday at 1.1833. The pullback follows remarks from some ECB policymakers expressing concerns about the pace of recent euro gains, which could have implications for monetary policy. This has put in a pause on the broad rally the cross has been seeing since mid last year, seen concomitantly with 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.

    [USD, CAD]
    USD-CAD has maintained a consolidation in the mid 1.24s over the last several sessions. The BoC's 25 bp rate hike last week met expectations, but was accompanied with cautious guidance. The central bank's gradual normalization reflects ongoing uncertainties, notably the NAFTA renegotiation. We expect two more 25 bp rate hikes this year, in July and October. Focus will remain on the NAFTA front, with uncertainty about this having curtailed the Canadian dollar rallying amid the surge in oil prices.

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