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By XE Market Analysis July 11, 2019 7:07 am
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    XE Market Analysis: North America - Jul 11, 2019

    The Dollar posted fresh lows against most of the main currencies as Fed Chairman Powell's testimony yesterday, where he signalled a 25 bp rate cut with the caveat that the Fed has the tools needed and could use them "aggressively" if necessary, continued to resonate. The narrow trade-weighted USD index (DXY) extended to a six-day low at 96.87, while EUR-USD rose to a six-day high at 1.1280 and USD-JPY posted a six-day low at 107.86. The U.S. currency saw a similar similar magnitude of decline against other currencies before settling above lows. In the mix has been an unexpected upward revision to June German HICP, to 1.5% y/y from 1.3% y/y, which bolstered EUR-USD. News that Iran tried to intercept a British tanker in the Strait of Hormuz (the UK government claimed that its navel ship HMS Monrose saw off three Iranian vessels with "verbal warnings") saw front-month WTI crude prices spike above $60.0, the first time above this level since late May. Focus today will centre on the second part of Powell's Congressional testimony.

    [EUR, USD]
    EUR-USD earlier rose to a six-day high at 1.1280 as the Dollar continued to rotate lower following Fed Chairman Powell's testimony yesterday, where he signalled a 25 bp rate cut with the caveat that the Fed has the tools needed and could use them "aggressively" if necessary. In the mix has been an unexpected upward revision to June German HICP, to 1.5% y/y from 1.3% y/y, bolstering EUR-USD's near-term upward bias. Support comes in at 1.1250-52.

    [USD, JPY]
    USD-JPY posted a six-day low at 107.86 amid post-Powell testimony Dollar selling, since recouping to the lower 108.0s. USD-JPY's 12-week bear trend looks to be reasserting itself following a two-week rebound. Resistance comes in at 108.45-48.

    [GBP, USD]
    Cable posted a six-day peak at 1.2545 on the float of broad USD weakness. This extends the rebound from the 27-month low seen earlier in the week at 1.2439. We wouldn't advise trend following GBP gains given the evident impact that prolonged Brexit uncertainty and increased risk of a on-deal exit from the EU have been wielding on the UK economy, though dollar weakening make carry Cable some way higher yet. Cable has support at 1.2510-12.

    [USD, CHF]
    EUR-CHF has put in a couple of weeks of steady, range-bound trading after dropping sharply in mid June as markets adjusted to increased prospects for the ECB to return to the dovish policy tap. The cross printed a two-year low at 1.1057 before recouping to levels around 1.1100. The advance of the Franc against the Euro will be displeasing to the SNB (the EUR-CHF cross being a good proxy on the Swiss currency's trade weighted value). The SNB restated at its quarterly policy review last month that downside risks to the economy have increased, and that the overall policy setting "remains as expansionary as before." The central bank also nudged its inflation forecast lower, now expecting CPI to average just 0.6% y/y this year, 0.7% in 2020, and 1.1% y/y in 2021. With the ECB increasingly under pressure to ease policy again, the SNB remains eager to counter Franc appreciation, especially against the Euro. Assuming the ECB remains on the path of further monetary policy easing, we would expect EUR-CHF retain a declining bias. The SNB's -0.75% deposit rate and threat of tactical intervention hasn't been sufficient to arrest recent appreciation of the Franc.

    [USD, CAD]
    USD-CAD printed a one-week low at 1.3047 amid a downward shift in the U.S. currency, extending the correction from yesterday's two-week high at 1.3144. The pair has been in a distinct bear trend since late May, declining in four of the last five weeks. A close tomorrow at or below 1.3084 would rack up another weekly decline. Trend resistance comes in at 1.3091-94.

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