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By XE Market Analysis March 19, 2018 7:26 am
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    XE Market Analysis: North America - Mar 19, 2018

    EUR-USD wound back intraday losses that were seen in pre-Europe trading in Asia rising to the 1.2280-90 area. EUR-JPY, EUR-CHF and other euro crosses are also up, with the notable exception of EUR-GBP, which has descended further into three-month low terrain on pound outperformance, which has been bid on the expectation of positive news on a Brexit transition agreement will come from the meeting of respective UK and EU negotiators. USD-JPY recouped the 106.0 level in London trade after trading heavily in Tokyo. The pair logged an intraday low at 105.68, which is 8 pips shy of Friday's low. EUR-JPY also lifted, earlier posting a two-week low at 129.61, while AUD-JPY, NZD-JPY and CAD-JPY also rebounded from relatively big intraday declines. USD-CAD posted a nine-month peak of 1.3125, capping a run higher of six consecutive sessions.

    [EUR, USD]
    EUR-USD wound back intraday losses that were seen in pre-Europe trading in Asia rising to the 1.2280-90 area. EUR-JPY, EUR-CHF and other euro crosses are also up, with the notable exception of EUR-GBP, which has descended further into three-month low terrain on pound outperformance (bid on the expectation of positive news on a Brexit transition agreement will come from the meeting of respective UK and EU negotiators). We advise fading EUR-USD gains on the back of yield differentials, which look likely to remain a negative for the pairing into and after this week's expected Fed rate hike. The Bund/T-note spread has widened below -228 bp, well out from -222 bp seen mid last week and another step closer to -235 bp historic wides. In the bigger view, EUR-USD remains mired at midway levels of a range that's been seen since late January, which marks a consolidative phase after rallying out of sub-1.1600 levels that were seen last November. A daily close below 1.2275 would suggest momentum is shifting more assuredly to the downside.

    [USD, JPY]
    USD-JPY recouped the 106.0 level in London trade after trading heavily in Tokyo. The pair logged an intraday low at 105.68, which is 8 pips shy of Friday's low. EUR-JPY also lifted, earlier posting a two-week low at 129.61, while AUD-JPY, NZD-JPY and CAD-JPY also rebounded from relatively big intraday declines. Concerns about Trumpian trade wars had been affecting the commodity-correlating dollar bloc currencies while generating safe haven demand for the yen. USD-JPY has been trending lower over the last week, and we expect more of the same for now. Support is at 105.20, and resistance is at 106.40.

    [GBP, USD]
    Sterling has rallied forth today, with Her Majestry's currency presently showing a 0.4% gain versus the dollar, euro and yen. This has carried Cable to a three-week high at 1.4021, and EUR-GBP to a seven-week low at 0.8768. GBP-JPY has lifted to a three-session high. The bid has been fuelled on the expectation of there being positive news on a post-Brexit transition agreement from today's meeting of respective UK and EU chief Brexit negotiators, Davis and Barnier, who will later hold a joint press conference. This is more of a bullish talking point for interbank and short-term speculative traders as there meeting won't yield anything concrete. This comes ahead of this week's two-day EU leaders' summit, on Thursday-Friday, where the 27 are expected to agree a roadmap for a post-Brexit transition period. Tomorrow's release of UK inflation data for February will be a focus, where we expect a dip in the headline CPI rate to 2.8% y/y from 3.0% y/y (median same). Cable has been trending moderately higher over the last three weeks, though we expect this bias to wane. Resistance is at 1.4069-70.

    [USD, CHF]
    EUR-CHF has settled in a narrow-ranged consolidation near the 1.1700 level following the early-March break higher from sub-1.1500 levels. A seven-week high was logged in early March at 1.1741. The SNB last week announced unchanged policy following its quarterly policy review, as had been widely anticipated, while reaffirming its commitment to monetary stimulus to keep what it still considers a richly-valued currency on a back foot. EUR-CHF rallied some 10% from mid last year, has been emblematic of the euro's recovery over the last year, with the franc unwinding latent safe haven premium as existential uncertainties under the Eurozone and EU come off the boil. Even though Eurosceptic parties won about 50% of the vote in Italy's recent general election, the governing political alliance led by La Lega has indicated that Italy will remain in the EU and retain the euro.

    [USD, CAD]
    USD-CAD posted a nine-month peak of 1.3122, capping a run higher of six consecutive sessions. The Canadian dollar has been underperforming amid worries about the NAFTA negotiation and after BoC Governor Poloz said last week that the unwinding of monetary stimulus would "remain cautious." Oil prices have also been trading on the flat-to-softer side, overall. Incoming Canadian data have consistent with the BoC's slow-go approach to policy normalization. Canada's week ahead brings the final inputs to the January GDP projection, with January wholesale trade (Tuesday), seen up 0.1%, January retail sales (Friday), seen rebounding 1.0% in January after the 0.8% drop in December. February CPI data is also up (Friday), expected to grow 0.3% m/m and by 1.8% y/y. USD-CAD technically remains solidly in an uptrend, which has been in play since late January. Trend support comes in at 1.3028-30.

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