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By XE Market Analysis May 17, 2018 6:36 am
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    XE Market Analysis: North America - May 17, 2018

    EUR-USD turned back under 1.1800 after rebound gains stalled at 1.1837. The political evolutions in Italy have continued to see Italian yields rise, and with them other peripheral Eurozone sovereign yields while safe-haven demand for German paper has suppressed Bund yields, which in turn has been weighing on the euro. USD-JPY printed a new 13-week high at 110.74, extending the upside run higher that's been unfolding since late March. The fresh gain also builds a breach head above the 200-day moving average (presently situated at 110.18) that was breached earlier in the week. Yen crosses also rose. Cable turned lower after the UK government rejected a report that it was of a mind for Britain to remain in the EU customs union to avoid a hard Irish border scenario. Cable posted an intraday low at 1.3490, down from the high at 1.3566. The pound also reversed lower against the euro and other currencies. AUD-USD reversed gains seen on an above-forecast Australian jobs report. The pair dipped under 0.7520 in London after earlier posting a high at 0.7547 during the Sydney session.

    [EUR, USD]
    EUR-USD has turned back under 1.1800 after rebound gains stalled at 1.1837. The political evolutions in Italy have continued to see Italian yields rise, and with them other peripheral Eurozone sovereign yields while safe-haven demand for German paper has suppressed Bund yields, which in turn has been weighing on the euro. We expect the directional bias will remain to the downside in EUR-USD, which yesterday clocked a five-month low at 1.1763. The pair is in what is now its fifth consecutive weekly decline, which has been structured on the dollar's rising yield advantage. Resistance is at 1.1845.

    [USD, JPY]
    USD-JPY has printed a new 13-week high at 110.74, extending the upside run higher that's been unfolding since late March. The fresh gain also builds a breach head above the 200-day moving average, presently situated at 110.18, that was breached earlier in the week, which technically-minded market participants will be noting. Yen crosses have also been on the up. We remain bullish of USD-JPY, anticipating the sharply contrasting Fed versus BoJ monetary policy stances likely to persist into 2019. Support is at 110.18-20.

    [GBP, USD]
    Cable has been trading heavily since the UK government's rejection of a report that it was of mind for Britain to remain in the EU customs union to avoid a hard Irish border scenario. Cable has posted an intraday low at 1.3490, down from the high at 1.3566. The pound has also reversed lower against the euro and other currencies. The Irish border has become a major political obstacle in the Brexit process, something that hadn't been appreciated at the time of the referendum (not that it would have necessarily altered the outcome of the vote, given the committed where-there-is-a-will-there-is-a-way attitude of many Brxit supporters). We remain retain a bearish view of Cable, anticipating the Fed to remain on a relatively hawkish policy path relative to the BoE for some time to come. Cable has support at 1.3478-80.

    [USD, CHF]
    EUR-CHF logged a five-week low yesterday at 1.1771 in synchrony with EUR-USD's swan dive to a five-month low at 1.1763, with both the cross and the pairing subsequently rebounding some. EUR-CHF lifted to 1.1830. Declines so far this week are marking the biggest intra-week decline since early January, interrupting a bull trend that's been in development since mid last year. Given that EUR-CHF is a good proxy of the Swiss franc's trade weighted value, and given Swiss policymakers view of the currency has still being overvalued, the latest price action won't been pleasing to the SNB, which can be expected to remain fully committed to its prevailing NIR policy. Former range lows at 1.1734-37, seen in early April, mark both a target and support.

    [USD, CAD]
    USD-CAD flopped back to the mid 1.2700s after flipping to a peak of 1.2924 earlier in the week. The recent ramp up in U.S. yields has been a support on the one hand, while the concurrent ramp up in oil prices have been a downward driver on the other hand, which have accounted for the choppy price action while leaving USD-CAD showing little net direction over the last week. We expect more of the same. Support comes in at 1.2729-30.

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