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By XE Market Analysis November 13, 2017 6:49 am
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    XE Market Analysis: North America - Nov 13, 2017

    The dollar has been mostly firming in early-week trading, the main exception being the case against the yen, which has outperformed amid declines in most global stock markets. The narrow trade-weighted USD index(DXY) was showing a 0.2% gain, as of the late London AM session, at 94.61, earlier logging an intraday high at 94.64, which is 1 pip shy of Friday's peak. EUR-USD was off by a similar magnitude, seeing stable trading just under 1.1650. The dollar also firmed against the commodity bloc currencies and sterling, presently registering 0.9% gain in the case versus the latter, which has been hit by open dissent within the government against the prime minister. USD-JPY ebbed below 113.30, with Japanese currency knocking the dollar into second position in the best performer league table . Overall directional bias is limited, and we expect the dollar's upside to be limited for now given the uncertainties about tax reform in the U.S.

    [EUR, USD]
    EUR-USD ebbed back under 1.1650, while EUR-JPY came under greater pressure and EUR-GBP, by contrast, lifted amid broader declines in the pound. Markets will continue to monitor the tax reform debate in the U.S., still unclear about the scale, content and timing, which, while the uncertainty persists should limit EUR-USD's downside potential. Support is at 1.1623-25, while, on the upside, key resistance levels are at 1.1687-91 and 1.1700.

    [USD, JPY]
    USD-JPY and yen crosses have traded lower today amid a backdrop of declining stock markets, which is generating demand for yen via the often-seen inverse risk-appetite correlate that the Japanese currency has. Stock markets in Europe and Asia traded mostly lower, following Wall Street's lead, where investors are unclear about the scale, timing and content of tax reform in the U.S. USD-JPY logged an intraday low of 113.34, drawing in Friday's low at 113.22. The pair's two-month rally phase has been losing momentum, and a relatively sustained correction looks to be afoot. We expect markets will remain sensitive to the ongoing tax cut debate. For now, the yen is likely to remain in some demand on dips, while the dollar is likely to remain a sell on rallies.

    [GBP, USD]
    Sterling has taken a tumble with the forex market perturbed by political uncertainty in the UK, with vital parliamentary votes on the Brexit bill coming at time of heightening tension and division in the government. 40 Tory party members of parliament are reportedly willing to sign a letter of no confidence in the prime minister, while a memo written by two senior cabinet members showed open dissention. The EU's chief negotiator Barnier also said that the bloc is drawing up contingency plans in the event the Brexit negotiations break down. Cable tumbled by over 0.5% in making two-session lows under 1.3100. While the pairing has been trading in the low 1.30s without a clear directional bias for over a month now, we see risks being greater to the downside than to the upside. Cable has a series of daily lows that were seen in October between 1.3027 and 1.3039, which now form a key support zone. Resistance is at 1.3168-70.

    [USD, CHF]
    EUR-CHF has been relatively settled over the last couple of weeks, trading on either side of the 1.1600 level. The 33-month peak seen in late October at 1.1712 has slipped off the radar screen for now, though, with the Eurozone gathering growth momentum, and seeming to have conquered political existential threats, we continue to anticipate an eventual return to 1.2000, which is the former trading floor of the SNB.

    [USD, CAD]
    USD-CAD has settled near 1.2700 after logging a three-week low at 1.2665 last week, which reaffirmed an emergent downward trend. The pair's two-month rally phase from sub-1.2100 levels looks to have stalled over the last week or so. BoC Governor Poloz last week reaffirmed guidance given last month by saying that "the economy is likely to require less monetary stimulus over time, we will be cautious in making future adjustments to our policy rate." We project the next BoC rate hike to be in March, and expect USD-CAD to remain in a downward path for now. Resistance is at 1.2700-05, and support is at 1.2600-02.

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