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By XE Market Analysis November 25, 2014 7:12 am
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    XE Market Analysis: North America - Nov 25, 2014

    Consolidation prevailed among the dollar majors. EUR-USD oscillated in the low-to-mid 1.24s, trading firmer following an unexpected improvement in French business confidence to 94 in November from 91. In conjunction with the improvements in the German ZEW and Ifo readings, the data show that the situation is not quite as gloomy as the Eurozone November PMI readings of last week suggested. ECB member Noyer still said that the central bank must be prepared to do more if necessary. USD-JPY dipped to a low of 117.69 during Tokyo trade, leaving an intraday peak at 118.58, and subsequently settled around 118.10-20 during the London AM session. The BoJ minutes to November 19 policy decision to boost stimulus substantially revealed mixed views on further stimulus, though many saw the risk of a delay in the end of a deflationary mind-set.

    [EUR, USD]
    EUR-USD oscillated in the low-to-mid 1.24s, trading firmer following an unexpected improvement in French business confidence to 94 in November from 91. In conjunction with the improvements in the German ZEW and Ifo readings, the data show that the situation is not quite as gloomy as the Eurozone November PMI readings of last week suggested. ECB member Noyer still said that the central bank must be prepared to do more if necessary. We don't expect recent euro gains to sustain. 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 and 1.2489-90. 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 dipped to a low of 117.69 during Tokyo trade, leaving an intraday peak at 118.58, and subsequently settled around 118.10-20 during the London AM session. The pair is consolidating after making a seven-year peak at 118.97 last Friday. The BoJ minutes to November 19 policy decision to boost stimulus substantially revealed mixed views on further stimulus, though many saw the risk of a delay in the end of a deflationary mind-set. 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. 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]
    Cable remained in consolidation mode in the upper 1.56s. Weaker than expected BBA mortgage approvals didn't have much impact, and nor did the parliamentary testimony of BoE MPC members, which elicited generally upbeat views of the economy but with mostly downbeat views of inflation. Cable looks to have found equilibrium in the mid-to-upper 1.50s after a four-month bear trend from the July peak at 1.7192. Resistance is marked at 1.5714 (Monday's and Friday's high) and 1.5736 (10-day high), support at 1.5625-28 and 1.5590 (thirteen-month low, made Nov-19).

    [USD, CHF]
    EUR-CHF is trading firmer this week, above 1.2020, 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 also 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 is trading near 1.1300. The Loonie had benefitted 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. 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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