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By XE Market Analysis November 14, 2017 6:22 am
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    XE Market Analysis: North America - Nov 14, 2017

    The euro has rallied by 0.5% versus the dollar and yen, and by over 0.6% versus the pound. Eurozone data releases today that include above-forecast German GDP and a rise, albeit sub-forecast, in the November ZEW survey out of Germany, have helped underpin the shared currency. EUR-USD, which has logged a three-week high at 1.1725, has also been aided upward by uncertainties about U.S. tax reform, including concerns it will be more narrow than hitherto hoped, and questions about how the proposed corporate tax rate reduction will be financed. USD-JPY has been flat-lining around 113.60-65, a directionless pattern that has been concomitant with relative stability in global stock markets. Cable dropped by some 40 pips in making an intraday low at 1.3074. UK October CPI unexpectedly remained at 3.0% versus the median forecast for an uptick to 3.1% y/y.

    [EUR, USD]
    The euro has rallied by 0.5% versus the dollar and yen, and by over 0.6% versus the pound. Eurozone data releases today that include above-forecast German GDP and a rise, albeit sub-forecast, in the November ZEW survey out of Germany, have helped underpin the shared currency. EUR-USD, which has logged a three-week high at 1.1725, has also been aided upward by uncertainties about U.S. tax reform, including concerns it will be more narrow than hitherto hoped, and questions about how the proposed corporate tax rate reduction will be financed. We expect EUR-USD's near-term bias will remain to the upside. Support is marked by former resistance levels at 1.1687-91 and 1.1700.

    [USD, JPY]
    USD-JPY has been flat-lining around 113.60-65, a directionless pattern that has been concomitant with relative stability in global stock markets. USD-JPY'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. Support is at 113.25-26 and 113.09-10, and resistance is at 113.87-90.

    [GBP, USD]
    The pound lost about 40 pips to the dollar in the immediate wake of the release of UK October inflation data, with headline CPI remaining at 3.0%, a five-year high and unchanged from September, contrary to the median forecast for an uptick to 3.1% y/y. Core CPI similarly underwhelmed. Cable left a low at 1.3074. Cable has been trading in the low 1.30s for over a month, but risks for a downside break are rising given political and Brexit-related uncertainties, with open dissention breaking out in the ranks of the government. A series of daily lows in Cable that were seen in October between 1.3027 and 1.3039, 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 in the mid 1.2700s 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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