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By XE Market Analysis May 15, 2018 6:04 am
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    XE Market Analysis: North America - May 15, 2018

    The dollar continued to rebound from the correction lows that were posted yesterday against many currencies. The narrow trade-weighted USD index (DXY) was showing a gain of 0.2%, as of the late London AM), at 92.71, earlier logging a two-session high at 92.81. EUR-USD cleared below yesterday's low on route to posting a two-day low at 1.1910, extending declines from yesterday's high at 1.1996. USD-JPY has lifted toward 110.00, returning focus to recent trend highs at 110.01-03. The dollar's gains have been concomitant with a renewed lift in U.S. Treasury yields, which took the 10-year T-note yield back above 3.0%. Sterling traded moderately firmer on UK labour data for March, which showed expected perkiness in pay growth and a data-series low in the employment rate. The pound lifted out of pre-data intraday losses, with Cable gaining some 30 pips in lifting to the 1.3550 area, and EUR-GBP falling by some 20 pips to the 0.8795-0.8800 area.

    [EUR, USD]
    EUR-USD cleared yesterday's low on route to posting a two-day low at 1.1910, extending declines from yesterday's high at 1.1996. The move was driven by dollar gains, which have been concomitant with a renewed lift in U.S. Treasury yields, which took the 10-year T-note yield back above 3.0%. Last week's four-month low at 1.1822 is back in range, though we see EUR-USD as having entered a comparatively stable trading range after tumbling some 4% from mid April through to last week. Support is at 1.1910-12.

    [USD, JPY]
    USD-JPY lifted toward 110.00, returning focus to recent trend highs at 110.01-03. A rebound in the dollar, which has been concomitant with a rebound in U.S. Treasury yields, with the 10-year T-note yield rising back above 3.0%, has driven the move as market participants focus returns back toward favourable yield differentials of the dollar versus the yen. Incoming remarks by Fed members have reaffirmed that the U.S. central bank remains on a course for continued moderate tightening, despite last week's sub-forecast U.S. CPI data, while a Reuters survey of market economists today found almost half expecting the BoJ to refrain from existing ultra-accommodative monetary policy stimulus until 2020 or later. USD-JPY would need to break and close above recent trend highs and the 200-day moving average, situated at 110.18 presently, to make for what many technically minded traders and investors would think of as a convincing affirmation of the bull trend that's been in evolution since early March.

    [GBP, USD]
    Sterling traded moderately firmer on UK labour data for March, which showed expected perkiness in pay growth (of 0.4% y/y in inflation adjusted terms in the ex-bonus figure) and a data-series low in the employment rate (75.6%) and a decline in the economically inactive rate (to 21.0%). With productivity lagging, expectations for a resumption of gradual BoE tightening later in the year should find some renewed support. The pound lifted out of pre-data intraday losses, with Cable gaining some 30 pips in lifting to the 1.3550 area, and EUR-GBP falling by some 20 pips to the 0.8795-0.8800 area. The gain matched a post-data spike of over 1 bp in the UK's 2-year yield, though this subsequently reversed, and the pound's upward bias stalled.

    [USD, CHF]
    EUR-CHF edged out a one-week high of 1.1963 and SNB Vice Chairman Zurbruegg told Schweiz am Wochenended that the franc is still "highly valued" nad that the central bank sees "no reason" to give up the negative interest rate or "our willingness to intervene in the foreign exchange market." We expect EUR-CHF to remain broadly underpinned.

    [USD, CAD]
    USD-CAD printed a three-session high earlier, at 1.2827, extending rebound gains from the three-week low that was seen last week at 1.2719. The disappointing April employment out of Canada, in data released on Friday, which weakened BoC tightening expectations, helped give the pair a prop, though renewed buoyance in oil prices should give the Canadian dollar an offsetting prop, if sustained. Crude prices are presently up 0.4% on the in the WTI benchmark futures market, at $71.38, which is just little 43 cents from the 42-month high that was posted last week. Resistance is at 1.2836-40. The Canadian calendar is quiet today ahead of a flurry of releases from tomorrow through to the end of the week, culminating in April CPI data on Friday.

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