Home > XE Currency Blog > XE Market Analysis: North America - Nov 26, 2018

AD

XE Currency Blog

Topics5953 Posts5998
By XE Market Analysis November 26, 2018 9:05 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4048
    XE Market Analysis: North America - Nov 26, 2018

    The Dollar came under broad pressure against most currencies, particularly the Dollar bloc units, which underperformed amid a rebound in global stocks and oil prices. Yen underperformance lifted USD-JPY, however, as the Japanese currency shed some of its safe haven premium. EUR-USD rallied to an intraday high of 1.1383 before settling lower in the wake of a softer than expected Germany Ifo investor sentiment survey. ECB chief economist Praet also said that the end of QE doesn't mean the end of accommodation, and wared that Italian financial conditions are "unsustainable." USD-JPY, meanwhile, rose to a 10-day high at 113.29. EUR-JPY and other Yen crosses also lifted. AUD-JPY was biggest mover out of the main dollar pairings and associated cross rates, making a one-week high at 82.38. Sterling has been trading neutrally so far today; Cable and GBP-JPY lifted on the back of the softer Dollar and JPY, while EUR-GBP held near net unchanged levels. The EU-27 approval the Brexit deal with the UK on Sunday, but it still looks highly uncertain whether the "worst of both worlds" deal will be passed in the UK's parliament, where the vote is pencilled in for December 12. The Australian dollar outperformed amid the backdrop of reviving risk appetite in global market, with oil prices and global stocks trading higher today. S&P 500 futures are up 1.2%, pointing to an open of the cash index later on Wall Street above the highs seen on Friday, which has been sparked by anecdotal signs of strong Black Friday sales in the U.S. AUD-USD has gained over 0.5% in making a five-day high at 0.7276. USD-CAD also fell, aided by a 1%-plus gain in crude prices.

    [EUR, USD]
    EUR-USD took a step back after rallying to an intraday high of 1.1383. A softer than expected Germany Ifo investor sentiment survey coupled with ECB chief economist Praet saying that the end of QE doesn't mean the end of accommodation, and warning that Italian financial conditions are "unsustainable," took a toll on the Euro. We still see EUR-USD as being in the bear trend that's been in play since April, although downside momentum has been waning in recent weeks, aided by the Fed signalling a pause in its tightening cycle from next spring. Signs of flagging growth momentum in the Eurozone (the latest being last Friday's release of flash estimates of the November PMI surveys) and a back-and-forth process between Brussels and Rome over the budget planning of Italy's populist government remain negatives for the Euro, however. Brexit also remains a wildcard risk. The EU-27 voted in favour of the Brexit plan agreed between the UK government and Brussels but it remains highly uncertain whether it will pas in Britain's parliament, and markets continue to factor in a risk of there being a lose-lose no-deal Brexit scenario (which we think very unlikely as most members of parliament are staunchly against this). EUR-USD has support is at 1.1320-22, and resistance 1.1406-08.

    [USD, JPY]
    USD-JPY has rallied amid a revival in risk appetite, with oil prices staging a partial rebound of last week's sharp losses and equity markets rising. The pair rose to a 10-day high at 113.25. AUD-JPY rose by a larger magnitude in making a five-day highs. USD-JPY's fundamentals (yield differentials and the associated contrast between Fed and BoJ policy paths) remain supportive, though periodic episodes of risk aversion have been an intermittent offsetting bearish force. USD-JPY has resistance at 113.31-34, and support at 112.60-63.

    [GBP, USD]
    Sterling has been trading neutrally so far today, with Cable settled in the in the low-to-mid 1.2800s and EUR-GBP in the mid 0.8800s, despite news that the EU-27 approval a Brexit deal with the UK on Sunday, with the problem being that it still looks highly uncertain whether the "worst of both worlds" deal will be passed in the UK's parliament. Markets continue to factor in a risk of there being a lose-lose no-deal Brexit scenario, which we think very unlikely as most members of parliament are staunchly against this. The UK parliament will likely vote on the deal on December 12. Should it be voted down, the government will have not choice but to return the issue to the people with either a general election or, more likely, another referendum, which would likely ask where to have a "hard" Breixt or remain in the EU.

    [USD, CHF]
    EUR-CHF has recouped to the lower 1.1300s steadied after dropping sharply to a two-month low at 1.1297 last week. A renewed spike in Italian yields amid ongoing wrangling between Roma and Brussels about Italy's budget had weighed on the common currency, reviving the Franc as a safe-haven currency. There has also been flagging economic growth momentum in the Eurozone. EUR-USD has support at 1.1300-05.

    [USD, CAD]
    USD-CAD tipped back under 1.3200, nearing Friday's low at 1.3186. A 1%-plus rebound in oil prices, and a broader revival in risk appetite in global markets have helped the Canadian currency and other Dollar bloc currencies find a footing. The 20%-plus plunge in oil prices over the last month, however, should ensure that the keeping the BoC on hold at its December-5 policy meeting, and this backdrop should keep the Loonie a sell-on-gains trade. The Canadian data calendar this week brings Q3 GDP, due Friday, which we expect to slow 2.0% q/q growth, down from 2.9% in Q2. USD-CAD has support at 1.3163-65, and resistance at 1.3236-40.

    Paste link in email or IM