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By XE Market Analysis November 28, 2017 7:15 am
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    XE Market Analysis: North America - Nov 28, 2017

    The dollar lifted moderately in cautious trading as key data releases from the major economies loom on the near-horizon and with uncertainties prevailing with regard to the scope of Fed tightening ahead and U.S. fiscal policy. USD-JPY recovered from the two-month low seen late yesterday at 110.83, which followed a bout of safe haven demand for the yen on reports that North Korea was prepping another test of a ICBM. The pair settled around 111.20-30. BoJ member Kataoka said today that the central bank needs to take additional easing steps as inflation is set to undershoot the 2% target through to the fiscal year of 2019, remarks which helped the yen come off the boil. EUR-JPY and other yen crosses saw a similar price action as USD-JPY. EUR-USD carved out a two-session low of 1.1874, building on the correction from the two-month high seen yesterday at 1.1961. USD-CAD lifted to one-week highs above 1.2800. Cable is also traded modestly softer, logging a two-session low at 1.3286.

    [EUR, USD]
    EUR-USD carved out a two-session low of 1.1874, building on the correction from the two-month high seen yesterday at 1.1961. Uncertainties with regard to the scope of Fed tightening ahead and U.S. fiscal policy, should continue to keep the pairing underpinned on dips, however, along with a run of encouraging data out of the Eurozone over the last week or so, and signs that a grand coalition government has a chance of forming in Germany, which would avoid the need for new elections and half reduce uncertainty. There have also been polls suggesting that pro-Spain parties in Catalonia have at least as much support as pro-independence parties (regional elections take place there next month). Market participants will now look to key data are due on both sides of the Atlantic this week. EUR-USD's technical picture is a bullish one. Support is at 1.1878-80, which was a former resistance level, marked by the October highs. The break and close above here has swung the scopes back on the 1.2000 level.

    [USD, JPY]
    USD-JPY recovered from a two-month low of 110.83, seen amid a bout of safe haven demand for the yen on reports that North Korea was prepping another test of a ICBM. The pair settled around 111.20-30. BoJ member Kataoka said that the central bank needs to take additional easing steps as inflation is set to undershoot the 2% target through to the fiscal year of 2019, remarks which helped the yen come off the boil. EUR-JPY and other yen crosses saw a similar price action today. We still take a bearish view of USD-JPY, with price action over the last week having reaffirmed the bearish trend that's been in evolution since early November. The September low at 110.83 provides the next downside waypoint. Resistance is at 111.77-80.

    [GBP, USD]
    Cable yesterday clocked a two-month high versus the dollar at 1.3383, which was largely a product of a weaker dollar as markets adjusting to a less certain pace of Fed tightening ahead, along with fiscal policy uncertainties. Cable's price action seemed to mark a break of the sideways range that's been in play since early October, though talk of good selling interest into 1.3400 seemed to have encouraged some squaring out. The failure to close above 1.3340 yesterday takes some of the technical significance out of the rally. UK data this week is loaded in the mid-to-latter part of the week, while there is a risk that the Brexit negotiation process will get tangled up by the Irish border issue, with Dublin threatening to use its veto in response to any proposal for a hard customs border. The BoE today released stress test results of the banking sector as part of its latest financial stability report, using its conclusions to demand an extra GBP 6 bln buffer from banks while calling for the UK and EU to introduce new legislation to avoid a post-Brexit crisis in derivatives and insurance markets.

    [USD, CHF]
    EUR-CHF has settled lower, south of 1.1700 having backed off after testing the 34-month high at 1.17123 yesterday, which was initially clocked on November 17. The cross logged a two-session low at 1.1671. There have been multiple failures to sustain gains above 1.1700 over the last month, so market participants will be wary of supply above 1.1700, helping reinforce the impression of a ceiling overhanging the market at 1.1700-25. Assuming the Eurozone has conquered, or can conquer, existential political threats, and assuming the SNB remains anchored to ultra-accommodative monetary policy, which looks likely to be the case for the foreseeable, we continue to anticipate EUR-CHF will make an eventual return to 1.2000, which is the former trading floor of the SNB. Supports are at 1.1625-16 and 1.1585.

    [USD, CAD]
    USD-CAD lifted to a one-week high of 1.2776. A rebound in the U.S. dollar and a backdrop of correcting oil prices, after seeing 28-month highs, have helped give the pairing an underpinning. BoC policymaker guidance over the last month or so has also been emphasizing that there is no rush to continue with its gradual tightening cycle. Former USD-CAD resistance at 1.2747-50 now reverts as a support. The November-21 high at 1.2837 provides the next upside target.

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