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By XE Market Analysis October 11, 2018 7:15 am
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    XE Market Analysis: North America - Oct 11, 2018

    The Dollar has traded with a softening bias so far today amid a backdrop of fairly acute equity market losses (S&P 500 futures down near 1%, China's SSE closing with a 5.2% loss and Europe's Stoxx 600 losing nearly 2%). EUR-USD settled around 1.1550 after earlier climbing to a nine-day high of 1.1572. USD-JPY settled in the lower 112.0s after posting a three-week low at 111.97 during Tokyo trading. EUR-JPY and AUD-JPY also saw one-month lows. Yen outperformance, although relatively moderate, and not sustaining ,drove the Yen cross moves. Cable traded softer after rising in four of the last five sessions, which left a three-week high at 1.3244. EUR-GBP, meanwhile, is steady after posting a four-month low at 0.8723. USD-CAD settled in the 1.3040-60 range (roughly) below the two-week high that was printed in early Asia-Pacific trade at 1.3070. A 4%-plus dive in oil prices over the last day has taken a toll on the Canadian dollar.

    [EUR, USD]
    EUR-USD has settled around 1.1550 after earlier climbing to a nine-day high of 1.1572. The high was produced by broad dollar selling that that was seen during the Wall Street rout. We advise buying into Dollar weakness, as we expect the U.S. currency would win out as a haven currency should equity market turmoil persist. Italy also remains a problem for the euro. EUR-USD has support at 1.1506-08.

    [USD, JPY]
    USD-JPY settled in the lower 112.0s after posting a three-week low at 111.97 during Tokyo trading. EUR-JPY and AUD-JPY also saw one-month lows. Yen outperformance, although relatively moderate, and not sustaining ,drove the moves amid a backdrop of plunging stock markets, which saw the Japanese currency pick up safe haven demand. Wall Street saw its worst day in over eight months yesterday, with the S&P 500 closing with a 3.3% loss, and S&P 500 futures extended lower by a further 1% in overnight trading with Asian markets hit hard. The Nikkei 225 closed 3.9% for the worse, and China's SSE by a sharp 5.2%. The rise in U.S. and global yields over the last week, which has come amid signs that inflation is making a return, is getting principal blame in market narratives (while Trump blamed the "crazy" Fed), in what seems like a post-financial crises watershed. The consequences of trade protectionism is also in the mix. More of the same seems likely.

    [GBP, USD]
    Cable is softer today after rising in four of the last five sessions, which left a three-week high at 1.3244. EUR-GBP, meanwhile, is steady after posting a four-month low at 0.8723. Recent gains have reflected some positive noises on the Brexit front. A London Times article yesterday claimed 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 rebels in May's own Tory party who are planning to vote against it). There still remains much uncertainty with regard Brexit, 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). The government's minister in charge of financial services, meanwhile, John Glen, said that he agreed with BoE estimate of 5k finance jobs being transferred to the continent as a consequence of Brexit. Cable has support at 1.3095.

    [USD, CHF]
    EUR-CHF has settled around the 1.1400 level, up from the nine-day low seen earlier in the week 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 settled in the 1.3040-60 range (roughly) below the two-week high that was printed in early Asia-Pacific trade at 1.3070. A 4%-plus dive in oil prices over the last day has taken a toll on the Canadian dollar, which follows last Friday's dual releases of September employment reports out of the U.S. and Canada, which were on balance bullish for the pairing. USD-CAD has support at 1.2893-95.

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