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By XE Market Analysis November 7, 2018 11:07 am
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    XE Market Analysis: North America - Nov 06, 2018

    The advent of today's U.S. midterm elections has been crimping directional ambition in markets. USD-JPY ebbed back toward 113.00 after printing a one-month high at 113.44, while EUR-JPY and AUD-JPY also reversed out of respective two-week and one-month highs. The Yen's rebound was concomitant with European stock markets and S&P 500 futures tacking lower, with sentiment shifting to a more cautious aspect after a positive Wall Street session yesterday, and mostly positive session on Asian bourses today. The elections in the U.S. has been crimping commitment given the possible consequences for Trumpian economic policy. EUR-USD has continued to narrowly orbit the 1.1400 level, which approximately marks the midway point for the range that's been seen over the last couple of weeks. We remain bearish of EUR-USD with signs of flagging economic growth momentum in the Eurozone, along with concerns about the Eurosceptic political movement, juxtaposing a U.S. economy in relative health. Sterling posted a fresh two-week high versus the dollar, at 1.3085, while concurrently printing a one-month high against the euro and a three-week peak to the yen. Optimism that a Brexit deal has entered the realms of realism, though the Irish border issue still remains a significant obstacle, with UK cabinet sources cited by the Guardian affirmed that the Irish border backstop remains the sole sticking point in Brexit talks. USD-CAD edged out a three-session high amid a backdrop of weak oil prices.

    [EUR, USD]
    EUR-USD has continued to narrowly orbit the 1.1400 level, which approximately marks the midway point for the range that's been seen over the last couple of weeks. We remain bearish of EUR-USD with signs of flagging economic growth momentum in the Eurozone, along with concerns about the Eurosceptic political movement, juxtaposing a U.S. economy in relative health (as evidenced by Friday's October employment report). EUR-USD resistance comes in at 1.1462-65.

    [USD, JPY]
    USD-JPY ebbed back toward 113.00 after printing a one-month high at 113.44. EUR-JPY and AUD-JPY reversed out of respective two-week and one-month highs. The Yen's rebound was concomitant with European stock markets and S&P 500 futures tacking lower, with sentiment shifting to a more cautious aspect after a positive Wall Street session yesterday, and mostly positive session on Asian bourses today. Today midterm elections in the U.S. has been crimping ambition given the possible consequences for Trumpian economic policy in the event that the Democratic Party wrest control of the House. This mood served to see the Yen firm, in accordance with the usual inverse-correlative pattern. USD-JPY's fundamentals (yield differentials and the associated contrast between Fed and BoJ policy paths) remain supportive, although periodic episodes of risk aversion has been an intermittent offsetting bearish force. USD-JPY has support at 112.35-37.

    [GBP, USD]
    Sterling posted a fresh two-week high versus the dollar, at 1.3085, while concurrently printing a one-month high against the Euro and a three-week peak to the Yen. Optimism that a Brexit deal has entered the realms of realism and a speculative market running an extreme net short exposure to the pound, has been eliciting upside traction. The Irish border issue still remain significant, so we would advise caution with regard to the pound's upside potential. Sources at No.10 cited by the Guardian affirmed that the Irish border backstop remains the sole sticking point in Brexit talks. The Irish prime minister yesterday rejected the idea that the UK could unilaterally decide to pull out of the backstop, which is something that the UK's Brexit minister Raab has been insisting on. Prime Minister May will be meeting with her cabinet today. The backstop is the Irish and EU's insistence that the divorce settlement includes a guarantee that the border on the island of Ireland will remain free-flowing in any post-Brexit scenario. We look for Cable to sustain a higher trading range, above 1.3000, though see limited scope for sustained gains. Support comes in at 1.3041-43.

    [USD, CHF]
    EUR-CHF has recouped back above 1.1400, recovering rom the five-week printed at 1.1355 in late October, which extended a descent from levels above 1.1500. The cross has support at 1.1405-10.

    [USD, CAD]
    USD-CAD has settled around 1.3100, above the 11-day low seen on Friday at 1.3049 and below the two-month high see last Wednesday at 1.3170. Fresh seven-month lows in oil prices today, coupled with Friday's miss in Canada's October jobs report, which contrasted with the strong U.S. jobs report for the same month, should keep USD-CAD underpinned. USD-CAD has support at 1.3049-50, and resistance at 1.3137-40.

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