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By XE Market Analysis October 10, 2017 7:54 am
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    XE Market Analysis: North America - Oct 10, 2017

    The dollar posted fresh lows against a number of currencies, before coming off those lows. EUR-USD logged a nine-day high against the dollar at 1.1807. EUR-JPY and other euro crosses also posted higher, before the common currency backed off on news that Catalonia's leader Puigdemont will be holding a press conference at 13:00 CET. Puigdemont has been under a lot of pressure to drop his secessionist plans (including from Barcelona's Mayor), although there remains speculation that he may announce a unilateral declaration of independence, which in the event would instantly be followed by Madrid suspending devolution on constitutional grounds..

    [EUR, USD]
    The euro came off the boil after earlier logging a nine-day high against the dollar at 1.1807. EUR-JPY and other euro crosses are also off earlier highs. News that Catalonia's leader Puigdemont will be holding a press conference at 13:00 CET sharpened the focus of market participants back on Spain. Puigdemont has been under a lot of pressure to drop his secessionist plans (Barcelona Mayor urged him not to declare independence), although there remains speculation that he may announce a unilateral declaration of independence, which in the event would instantly be followed by Madrid suspending devolution on constitutional grounds (a factor that is keeping the euro and Spanish markets on a relatively calm footing).

    [USD, JPY]
    USD-JPY ebbed to the lower 112s after a brief run higher to 112.82. Tokyo markets returned from a three-day weekend, and there would have been a relatively high amount of netted corporate forex transactions today, with the date being a multiple of five. USD-JPY remains off Friday's three-month high at 113.44. The relatively dovish stance of the BoJ versus the Fed has been keeping the pair bid on dips, though geopolitical tensions and risks are serving to curtail the upside, and the one-month bullish phase, from the early-September low at 107.31, has been showing signs of flagging. Momentum indicators, such as the 14-day RSI, have been in 'bearish divergence', where new highs are seen but at the same time as trend momentum declines. A key support zone, formed by a series of recent daily lows, is at 112.21-33.

    [GBP, USD]
    Sterling has managed to rebound of the ground it lost last week, when the pound posted its biggest weekly decline since August 2016. A report in the London Times highlighting on ONS error causing an under-estimation of companies' costs has given the BoE rate hike case a boost, providing support for the pound. Cable logged a three-session high of 1.3203, extending the recovery from Friday's one-month low at 1.3027. . Incoming UK data have been mixed, with above-forecast production data being offset by a worse than expected blowout in the deficit, and with headline strength in the BRC retail survey for September being offset by the fact that the data was inflated by higher prices.

    [USD, CHF]
    EUR-CHF has lifted back above 1.1500, logging a two-week high at 1.1515. The move reflects a broader bid in the euro, with markets evidently not expecting the Catalans to unilaterally declare independence at this stage (Catalan President Puigdemont is set to address lawmakers in Barcelona today). Former EUR-CHF resistance at 1.1488-90 and 1.1500 now revert as supports. We still expect the franc trade on a generally softer path versus the dollar, and other currencies. The SNB stated at its quarterly policy review last month that the Swiss franc "remains highly valued," even in light of the relatively sharp weakening the currency saw from late July.

    [USD, CAD]
    USD-CAD ebbed to a three-session low of 1.2510, extending the correction from last week's five-week high at 1.2600. We anticipate demand on dips. The Fed is back on a tightening march, while the Canadian dollar is likely to remain with a neutral-to-softer bias, in place since BoC Governor Poloz unexpectedly threw cold water on market expectations for further rate hikes in saying that the central bank was not on a predetermined path while emphasizing that there are "important unknowns" to be watched closely.

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