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By XE Market Analysis July 12, 2019 7:09 am
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    XE Market Analysis: North America - Jul 12, 2019

    The USD picked up bids during the London AM session after posting intraday lows in pre-Europe trading. EUR-USD ebbed to the 1.1255 area, down from the intraday high at 1.1275, leaving yesterday's eight-day high at 1.1285 unchallenged. Above-forecast May Eurozone production data had only a fleeting impact on EUR-USD, though the Euro ground out gains against most other currencies. USD-JPY settled to around 108.30-35 after printing a high at 108.61. The high extended the recovery from the one-week low seen yesterday at 107.86. The Canadian Dollar outperformed, pushing USD-CAD down for a third consecutive day, to a nine-month low at 1.3018, extending losses from the two-week high seen on Wednesday at 1.3144. A close today at or below 1.3084 today would rack up another weekly decline.

    [EUR, USD]
    EUR-USD has been whittled lower by markets in London, reversing gains seen during pre-European trading. The pair has returned to the 1.1255 area, down from the intraday high at 1.1275. Yesterday's eight-day high at 1.1285 has been left unchallenged so far. Above-forecast May Eurozone production data had only a fleeting impact on EUR-USD, though the Euro has ground out gains against most other currencies in the wake of the figures. The Dollar has been finding some demand following yesterday's 10bp-odd spike in the 10-year U.S. T-note yield yesterday, which followed above-forecast core CPI and jobless claims data out of the U.S. and came as as the S&P 500 and DJIA hit record highs. While the Congressional testimonies of Fed Chair Powell this week signalled a 25 bp rate cut at the FOMC later this month, leaving the door open to a more aggressive policy action, a couple of other Fed speakers yesterday were a little less sanguine over the need for more stimulus. EUR-USD support comes in at 1.1148-50. The pair has been trading broadly neutrally in directional terms since late April, notwithstanding the 26-month low that was edged out in mid May, which has followed what was about a 14-month down trending phase.

    [USD, JPY]
    USD-JPY settled to around 108.30-35 after printing a high at 108.61. The high extended the recovery from the one-week low seen yesterday at 107.86. The pair has been in a bear trend for some 12 weeks now, although rebounding over the last two weeks. A close above 108.46-48 today would be needed to make it three straight weeks of gains. Resistance comes in at 108.45-48.

    [GBP, USD]
    Cable has settled lower after posting a one-week peak at 1.2571 yesterday, which extended the rebound from the 27-month low seen earlier in the week at 1.2439. We remain neutral-to-bearish with regard to the Pound 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. GBP-USD 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 is down for a third consecutive day, this time printing a nine-month low at 1.3018, extending losses from the two-week high seen on Wednesday 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 today at or below 1.3084 today would rack up another weekly decline. Trend resistance comes in at 1.3071-73.

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