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By XE Market Analysis September 13, 2017 7:27 am
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    XE Market Analysis: North America - Sep 13, 2017

    The dollar's post-weekend "relief" recovery ran out of gas today, although the buck still saw a fresh higher versus an underperforming yen. Cable, extending the sharp gains seen after yesterday's perky UK inflation data, also traded softer after wage data came in off expectations, despite a new cycle low in unemployment.

    [EUR, USD]
    EUR-USD saw good offers ahead of 1.2000, which consequently pushed the pair back from a high of 1.1995 to near net unchanged levels close to 1.1970. With the post-weekend dollar buying spree having puffed out, and with little fresh direction leads (Eurozone production and German HICP data matched expectations), the pairing has settled to a price action consolidation. EUR-USD support is at 1.1887-90, and resistance is at 1.1995-1.2000.

    [USD, JPY]
    USD-JPY clocked a 12-day high at 110.29, and EUR-JPY posted a 20-month high at 132.01, reflective of the underperformance in the yen. The weakness in Japan's currency has been concomitant with gains in global stock markets amid relief that hurricane damage has been less than feared in the U.S. With pre-weekend risk-off positioning having been more than reversed, and with the likelihood of further sabre-rattling antics from North Korea as the rogue nation draws nearer to nuclear ICBM capability, we don't recommend following USD-JPY higher, and instead advise on expecting a resumption of the downward trend. Resistance is at 110.49-67, levels which encompass a number of prior daily highs.

    [GBP, USD]
    Cable lost just over 30 pips on data showing weak wages in the UK, which more than offset an unexpected dip in the unemployment rate to a new 42-year low of 4.3%. Average household income came in at a nominal growth rate of 2.1% y/y in the three months to July, unchanged from the prior month's figure but below the median forecast for a tick higher to 2.3% y/y. The wages data show that a high employment/low unemployment levels are not translating into higher incomes, which in light of yesterday's inflation data showing headline CPI running at 2.9% y/y in August, are firmly in negative growth. The data suggest that the key consumer sector will remain relatively soft, and with it the UK economy in relative stagnation. Given this, and Brexit uncertainties, we recommend shorting Cable.

    [USD, CHF]
    EUR-CHF rallied to a six-week high at 1.1512 as the franc continued to lose safe haven premium amid a global stock market rebound and associated relief that the hurricane damage in the U.S. hasn't been as bad as the worst fears. This has continued a choppy phase in EUR-CHF trading. SNB boss, Jordan, signalled last week that the central bank remains fully committed to its ultra-accommodative monetary policy settings, saying that he and his colleagues did not know if recent franc weakness, which is desirable from their perspective, would sustain. In the scenario that geopolitical tensions ebb back, we would by bullish of EUR-CHF. Assuming the Eurozone economic revival remains on track, which would help quell ECB angst about euro strength, and assuming the ECB commits to QE policy tapering at some point over the next month or two, we would expect the EUR-CHF to eventually recover to the SNB's former floor level at 1.2000.

    [USD, CAD]
    USD-CAD yesterday lifted out of a three-day low at 1.2082, and logged a peak at 1.2189, since settling nearer 1.2150. Bigger picture, we anticipate the USD-CAD's downtrend, which has been in place since May, will resume. The Canadian employment report last Friday was supportive of the BoC's path to normalize monetary policy, and Canadian policymakers have been viewing the economy as having escaped the drag from the downside oil price shock of recent years.

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