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By XE Market Analysis November 24, 2014 6:10 am
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    XE Market Analysis: North America - Nov 24, 2014

    The dollar was generally firm, though lost ground to the euro following an unexpected rise in the November German Ifo sentiment survey. EUR-USD recovered from an Asia-session dip to 1.2362, leaving the Nov-6 trend low at 1.2358 unchallenged, and extended gains to a peak of 1.2414 following the Ifo report. ECB's Constanzio also said that the Eurozone is not at risk of sliding into "full deflation," though the inflation rate is "dangerously" low. EUR-CHF traded slightly firmer, lifting to the 1.2025-30 area, after SNB's Jordan repeated his opposition to gold initiative, arguing that it would impede the central bank's ability to defend the 1.2000 franc cap. USD-JPY traded firmer, breaching above 118.00 and making a high of 118.38, surpassing Friday's peak by a couple of pips. The move follows a Liquidity-zapped session in Asia in the absence of Japanese markets, which were closed due to a public holiday. The dollar, meanwhile, traded moderately firmer against sterling and the Aussie, among other currencies. Reuters reported that China is ready to cut interest rates again, according to an unnamed economists at a government think-tank, due to concerns about the threat of deflation. That, in the wake of last Friday's surprise rate cut, gave stocks in Asia and Europe a boost.

    [EUR, USD]
    EUR-USD traded at following the unexpected rise in the German Ifo business expectations survey, which lifted to 104.7 in November from October's 103.2. This was a relief as last week's flash November PMI data had signalled downside risk to the Ifo report. EUR-USD has seen a peak of 1.2414, which is over 50 pips up on the 18-day low seen in Asia. We don't expect euro gains to sustain. ECB's Constanzio said that although the Eurozone is not at risk of sliding into "full deflation," the inflation rate is "dangerously" low. Support is marked by the Nov-6 low at 1.2358, which is the lowest level traded since August 2012, and resistance is at 1.2445. We look for an eventual move on the July 2012 low at 1.2042 due to diverging Eurozone and U.S. economic growth.

    [USD, JPY]
    USD-JPY has traded firmer, breaching above 118.00 and making a high of 118.38, surpassing Friday's peak by a couple of pips. The move follows a Liquidity-zapped session in Asia in the absence of Japanese markets, which were closed due to a public holiday. PM Abe's rush for a new mandate for Abenomics (elections to be held Dec-14) has driven the recent across-the-board decline in the yen, which saw USD-JPY log a seven-year high at 118.96 last Thursday. We expect divergent economic and central bank policy paths between the U.S. and Japan will remain broadly supportive of USD-JPY, anticipating move on 120.00.

    [GBP, USD]
    We remain bearish of sterling in the case against the dollar. We see that the U.K.'s recovery pace will continue to be eroded by economic stagnation across the Channel and slowing in some key emerging economies. Resistance is at 1.5687-1.5700, support at 1.5630 and 1.5600. We target 1.5500.

    [USD, CHF]
    EUR-CHF has traded slightly firmer, lifting to the 1.2025-30 area, after SNB's Jordan repeated his opposition to gold initiative, arguing once again that it would impede the central bank's ability to defend the 1.2000 franc cap. There are market rumours that the SNB has effectively set up a buffer zone by lining up bids from 1.2010 to 1.2000, and Reuters has reported last week that a sizable bid was conspicuously placed on EBS at 1.2006. SNB's Zurbruegg pledged last week that that 1.2000 franc cap will be defended "with utmost determination" as the bank is prepared to buy an unlimited amount of FX and take further measures immediately if needed. Polls suggest that the "Save our Swiss Gold" initiative (referendum will take place on Nov-30) doesn't have sufficient support, which may be helping to give a EUR-CHF an underpinning.

    [USD, CAD]
    USD-CAD has re-established itself back under 1.1300 as Loonie benefits in the wake of the unexpected PBoC rate cut last week. We continue to expect a challenge on the major-trend high at 1.1467, however, on the back of U.S. dollar strength, however. The likelihood for continued soft oil prices is also a relative downer for the Canadian dollar. Resistance is marked at 1.1400 and 1.1480-1.1500, support is at 1.1260-65-1.1250.

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