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By XE Market Analysis November 28, 2018 7:07 am
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    XE Market Analysis: North America - Nov 28, 2018

    The Dollar has continued to trade mixed, posting a two-week high versus both the Euro and Yen before retreating, while losing ground to a generally firmer Pound today, and the Australian and New Zealand Dollars. EUR-USD recouped to the upper 1.1200s after printing a two-week low at 1.1267. The drop-and-rebound price action was concurrent with a spike-and-fall action of Italy's 10-year yield, with Italian asset markets mollified by Finance Minister Tira reaffirming Rome's commitment to dialogue with Brussels. USD-JPY, meanwhile, traded firmer concomitantly with rise in global stock markets, with the pair posting a two-week high at 113.90. AUD-JPY and other Yen crosses have also lifted. The main Chinese share indexes have gained over 1% while S&P 500 futures are up in overnight trading, extending the 0.3% gain seen in regular trading on Wall Street yesterday. The Trump administration's economic advisor said there is scope for a possible "breakthrough" in U.S.-China trade relations at the dinner meeting scheduled on Friday between Trump and Xi, while the Chinese ambassador to the U.S. said in an interview with Reuters that Beijing will not use U.S. Treasuries as a trade weapon. Cable recouped to the upper 1.2700s from yesterday's two-week low at 1.2725, despite UK Chancellor Hammond saying that all versions of Brexit will leave the economy worse off, and with the Brexit deal looking ill-fated in parliament. One solace is the evident overall support among most members of parliament to avoid a no-deal crash-out Brexit scenario.

    [EUR, USD]
    EUR-USD recouped to the upper 1.1200s after earlier printing a two-week low at 1.1267. This is the third consecutive day of decline the pairing has seen. Technically-minded participants will be looking for a close today below yesterday's 1.1293-95 closing levels as an indication of bearish momentum. The drop-and-rebound price action has been concurrent with a spike-and-fall action of Italy's 10-year yield, with Italian asset markets mollified by Finance Minister Tira reaffirming Rome's commitment to dialogue with Brussels. Before this, the euro had been under some pressure after Trump yesterday threatened a blanket rise in car import tariffs to the U.S. We view EUR-USD as remaining in the big-picture bear trend that's been in play since April, although downside momentum has been waning in recent weeks after senior Fed policymakers signalled a pause in its tightening cycle from next spring. Signs of flagging growth momentum in the Eurozone (such as 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, with Brexit also presenting risks. EUR-USD as resistance at 1.1310-12.

    [USD, JPY]
    USD-JPY has traded firmer concomitantly with rise in global stock markets, with the pair posting a two-week high at 113.90. AUD-JPY and other Yen crosses have also lifted. The main Chinese share indexes have gained over 1% while S&P 500 futures are up in overnight trading, extending the 0.3% gain seen in regular trading on Wall Street yesterday. The Trump administration's economic advisor said there is scope for a possible "breakthrough" in U.S.-China trade relations at the dinner meeting scheduled on Friday between Trump and Xi, while the Chinese ambassador to the U.S. said in an interview with Reuters that Beijing will not use U.S. Treasuries as a trade weapon. 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 114.00, and support at 113.34-35.

    [GBP, USD]
    Cable has recouped to the upper 1.2700s from yesterday's two-week low at 1.2725, recouping about half of the losses seen yesterday. EUR-GBP has concurrently ebbed to a 12-day low at 0.8834. The price action reflects the UK currency having found its feet following its post-weekend wobble. This is despite Chancellor (the UK's finance minster equivalent) Hammond saying that all versions of Brexit will leave the economy worse off. The EU and UK may have shook hands on a deal, but Brexit remains heavily clouded in uncertainty. One solace is the evident strong support among members of parliament -- outside the relatively small Eurosceptic Brexiteer cabal -- to avoid a no-deal crash-out Brexit scenario, which seems to be giving the pound buoyancy. John McDonnell, the shadow chancellor has become the first senior Labour Party minister to openly acknowledge that a second referendum "might be an option we seize upon," adding that a "no-deal" option should not be on the ballot paper. With Northern Ireland's DUP, to which PM May's Tory party depends on to operate as a minority government, yesterday stressing that it "cannot support" the deal on offer, Prime Minister May looks to be short of about 60 votes to get the deal over the line in parliament. The vote is pencilled in for December 12. Cable has support at 1.2696-1.2700, which encompasses the four-month lows seen in late October.

    [USD, CHF]
    EUR-CHF has drifted to two-month low territory under 1.1280. Signs of flagging growth momentum in the Eurozone along with volatility in Italian yields amid ongoing wrangling between Roma and Brussels about Italy's budget have been weighing on the common currency lately. EUR-CHF has support at 1.1260, and resistance at 1.1300-03.

    [USD, CAD]
    USD-CAD has lifted to five-month highs above 1.3325. The 20%-plus plunge in oil prices over the last month has ensured that the BoC will be on hold at its December-5 policy meeting, and this has been keeping 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. The 17-month high seen in June at 1.3387 provides an upside waypoint for USD-CAD. Support comes in at 1.3275-77.

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