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By XE Market Analysis November 26, 2014 6:13 am
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    XE Market Analysis: North America - Nov 26, 2014

    The dollar has been mixed in relatively narrow ranges, firmer against the euro, lower versus sterling and the yen. The biggest mover out of the main currencies has been the Aussie, which dove to new major-trend lows. EUR-USD drifted below 1.2450 as losses seen from the high 1.24s extended. ECB Constancio said that the central bank may "have to consider buying other assets, including sovereign bonds in the secondary market," which follows the OECD's call yesterday for the ECB to consider QE to fight deflation risks. USD-JPY managed to eke out a two-day low at 117.59 after peaking at 117.93 in Tokyo, finding a footing amid reports of Japanese investor demand. The pair is consolidating after making a seven-year peak at 118.97 last Friday. AUD-USD dove to fresh four-year lows after breaching yesterday's 0.8513 low and the 0.8500 level, which was reportedly a big option barrier level. The low so far has been 0.8480, and a subsequent rebound has been too feeble to return 0.8500 back into play, at least at the time of writing.

    [EUR, USD]
    EUR-USD drifted below 1.2450, extending losses seen from the high 1.24s during the early part of the European AM session. We don't expect recent euro gains to sustain. Prospects of QE are becoming more real. ECB Constancio said today that the central bank may "have to consider buying other assets, including sovereign bonds in the secondary market." The OECD on Tuesday called on the ECB to consider QE to fight deflation risks, which will support the doves at the central bank. This backdrop should help maintain the overall downside bias of the euro. Support is marked by the Nov-6 low at 1.2358, which is the lowest level traded since August 2012, and resistance is at 1.2494-1.2500. 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 managed to eke out a two-day low at 117.59 after peaking at 117.93 in Tokyo, finding a footing amid reports of Japanese investor demand. The pair is consolidating after making a seven-year peak at 118.97 last Friday. 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 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 1.5735 and 1.5736 (12-day high), support at 1.5625-28 and 1.5590 (thirteen-month low, made Nov-19).

    [USD, CHF]
    EUR-CHF has continued to trade 1.2020. The cross had lifted from the 1.2010 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 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 recently pledged that the 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 back below 1.1300, with the Loonie benefitting 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 1.1230-35.

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