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By XE Market Analysis October 12, 2018 6:46 am
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    XE Market Analysis: North America - Oct 12, 2018

    EUR-USD edged out a new intraday low of 1.1575, correcting after earlier printing a 12-day high at 1.1610. USD-JPY settled in the lower 111.0s after posting a 25-day low at 111.83 during the late New York PM session yesterday. The low was seen following by broad Dollar declines in the wake of the softer than expected U.S. CPI data yesterday, which has taken the edge out of Fed tightening expectations (although we still anticipate a hike in December, and two further more in the first half of 2019). Subsequent gains in USD-JPY have reflected broader Yen weakness, which has seen safe-haven premium unwind as stocks stabilise. S&P 500 futures managed gains of more than 1% after the cash index closed yesterday on Wall Street with a 2.1% decline. EUR-JPY and most other Yen crosses have also lifted. In news today, a 5.3 earthquake hit Japan's Kanto region, which reportedly manageable for Japan. No tsunami warning has been issued. A senior official from the IMF, which today started its annual meeting in Bali, said that it was "too early" for Japan to talk about normalizing monetary policy while encouraging Tokyo to make structural reforms to accompany the stimulus. Cable settled around 1.3220 after posting a three-week high at 1.3251, with the pair having now risen in five of the last six sessions.

    [EUR, USD]
    EUR-USD edged out a new intraday low of 1.1575, correcting after earlier printing a 12-day high at 1.1610. The high was part reflection of broader Dollar weakness and part reflection of broader Euro gains (which propelled EUR-CHF to a two-month high of 1.1492). The gains in the common currency have been concomitant with a calming in Italian asset markets, although the jury remains out with regard to the credibility and stability of the populist coalition government, are markets are likely factoring in discount in the Euro. We expect EUR-USD to remain without strong direction for now, although seen risks as been greater for a sustained downside move than for a sustained upside move. Support is at 1.1544-46.

    [USD, JPY]
    USD-JPY has settled in the lower 111.0s after posting a 25-day low at 111.83 during the late New York PM session yesterday. The low was seen following by broad Dollar declines in the wake of the softer than expected U.S. CPI data yesterday, which has taken the edge out of Fed tightening expectations (although we still anticipate a hike in December, and two further more in the first half of 2019). Gains in USD-JPY in Tokyo, however, have reflected broader Yen weakness, which has see safe-haven premium unwind as stocks in Asia stabilise, and with S&P 500 futures managed gains of more than 1.2% (after the cash index closed on Wall Street with a 2.1% decline). EUR-JPY and most other Yen crosses have also lifted. In news today, a 5.3 earthquake hit Japan's Kanto region, which reportedly manageable for Japan. No tsunami warning has been issued. A senior official from the IMF, which today started its annual meeting in Bali, said that it was "too early" for Japan to talk about normalizing monetary policy while encouraging Tokyo to make structural reforms to accompany the stimulus.

    [GBP, USD]
    Cable settled around 1.3220 after posting a three-week high at 1.3251, with the pair having now risen in five of the last six sessions. Brexit negotiations are coming to a head into next week's Brussel's summit (which starts Wednesday), and so far there has been little sign of there being a breakthrough. We think the only way forward for the British government will be to concede its desire for partial access to the single market, an idea which has been strongly and consistently rebuffed by the EU 27, with the group's chief negotiator Barnier yesterday emphasizing that it is unacceptable for the remaining members as they see it as putting the UK at a competitive advantage. The Irish border problem (how to maintain a free-flowing border between Ireland and Norther Ireland in whatever Brexit scenario) also remains unresolved. Even if the UK and EU managed to pull a rabbit out of a hat and agree on a deal, there would be no guarantee that it would pass a parliamentary vote given the divisions both within the fragile Tory party and DUP governing alliance, and between the parties. Cable has support at 1.3190-91.

    [USD, CHF]
    EUR-CHF rallied to a two-month high of 1.1492. The gains have been concomitant with a calming in Italian asset markets, although the jury remains out with regard to the credibility and stability of the populist coalition government, which markets are likely to demand a discount in the Euro. The cross has resistance at 1.1537-40.

    [USD, CAD]
    USD-CAD has settled in the lower 1.3000s, earlier printing an intraday low at 1.3002 before lifting back above 1.3020. The low extended the retreat from the two-week high that was pegged yesterday at 1.3070. There have been mixed forces acting on the pairing, with the U.S. yield advantage of the Canadian yields having eroded in recent sessions, while a 5%-plus dive in oil prices this week took a toll on the Canadian Dollar, though crude markets have now appeared to have found a footing. On balance, we favour the upside in USD-CAD. The pair has support at 1.2893-95. Both the U.S. and Canadian calendars are devoid of top-tier releases today.

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