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By XE Market Analysis October 10, 2018 6:14 am
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    XE Market Analysis: North America - Oct 10, 2018

    The Dollar majors have continued to ply mostly narrow ranges. EUR-USD has continued to gravitate around 1.1500, returning to this level after yesterday briefly breaking orbit and posting a seven-week low at 1.1432. Concerns about Italian budgetary prudence have continued to linger, although BTP yields have come off their highs today. USD-JPY has remained entrenched in a narrow range around the 113.00 level, above the nine-session low printed on Monday at 112.82. The recent rise in U.S. over Japan yield differential is providing support for USD-JPY, offsetting safe-haven demand for the Japanese currencies amid a backdrop of fragile investor sentiment in global markets, which are digesting high yields and the threat from trade protectionism. Cable printed a two-week high at 1.3185 while EUR-GBP fell to a near four-month low at 0.8723. The pound was bid on a London Times article claiming that 30 Labour party MPs will reportedly back Prime Minister May's Brexit plan, suggesting that there could be enough votes for the plan to pass a parliamentary vote, as this would offset Tory party rebels who are planning to vote against it. USD-CAD lifted back above 1.2950 after posting a three-session low of 1.2917.

    [EUR, USD]
    EUR-USD has continued to gravitate around 1.1500, returning to this level after yesterday briefly breaking orbit and posting a seven-week low at 1.1432. Concerns about Italian budgetary prudence have continued to linger, and we continue to favour EUR-USD's downside given the strong fundamental credentials of the Dollar. EUR-USD has resistance at 1.1515.

    [USD, JPY]
    USD-JPY has remained entrenched in a narrow range around the 113.00 level, above the nine-session low printed on Monday at 112.82. The recent rise in U.S. over Japan yield differential is providing support for USD-JPY, offsetting safe-haven demand for the Japanese currencies amid a backdrop of fragile investor sentiment in global markets, which are digesting high yields and the threat from trade protectionism. The 10-year U.S. Treasury yield has this week lifted to a fresh seven-year highs above 3.25%.

    [GBP, USD]
    Cable managed to eke out a two-week high at 1.3185 and EUR-GBP a near four-month low at 0.8723. The pound has been bid on a London Times article claiming that 30 Labour party MPs will reportedly back Prime Minister May's Brexit plan, suggesting that there could be enough votes for the plan to pass a parliamentary vote, as this would offset Tory party rebels who are planning to vote against it. There still remains much uncertainty, not least about how the UK and EU will overcome the Irish border backstop problem (to guarantee a free-flowing border in what even Brexit scenario), but the Times report, if accurate, suggests that a negotiated plan would have a chance of passing a House of Commons vote, which hitherto had been looking unlikely given the differences between the factions in the fragile ruling Tory-DUP governing alliance, and between the parties. Cable has resistance at 1.3218-20, and support at 1.3095.

    [USD, CHF]
    EUR-CHF has rebounded to around the 1.1400 level after yesterday posting an eight-day low at 1.1369. The gain the cross saw last week reflected a pricing-out of safe haven positioning after the Italy's coalition government produced a EU-appeasing budget, although concerns remain. EUR-CHF has resistance at 1.1415-18.

    [USD, CAD]
    USD-CAD has retreated to the lower 1.2900s, correcting from Mondays nine-session high at 1.3010, which had extended the gain seen in the wake of Friday's dual releases of September employment reports out of the U.S. and Canada. The reports were on balance bullish for the pairing (taking into account the strong back revisions to the U.S. report, which offset an underwhelming headline). USD-CAD has support at 1.2885-90, and resistance at 1.2893-95.

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