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By XE Market Analysis May 17, 2019 2:26 pm
    XE Market Analysis's picture
    XE Market Analysis Posts: 4294
    XE Market Analysis: Asia - May 17, 2019

    The dollar moved higher in morning trade in N.Y. on Friday, seeing the DXY touch two-week highs of 98.00, and up from overnight lows of 97.77. The apparent heating up of U.S./China trade rhetoric resulted in some safe-haven flows into the Greenback, while solid consumer sentiment data supported the USD as well. Wall Street recovered some early losses following report the U.S. would delay auto tariffs for at least six months, and the U.S. agreed to remove tariffs in place on Canadian and Mexican steel and aluminum imports. EUR-USD bottomed at two-week lows of 1.1156, while USD-JPY recovered from 109.50 to print over 110.00 on improved risk taking levels. USD-CAD fell to 1.3435 lows as tariffs were lifted, coming from three-plus week highs of 1.3513. Cable printed four-month lows of 1.2720 as Brexit talks collapsed.

    [EUR, USD]
    EUR-USD dropped to two-week lows of 1.1156 at mid-morning, as the Dollar overall rallied on the back of a record high U. Michigan consumer sentiment print, and save-haven USD buying on the back of a heating up U.S./China trade spat. The pairing lifted back toward 1.1170 into the London close, as pre-weekend position squaring set in. Ongoing bouts of trade related risk-off should keep the Euro's upside contained going forward.

    [USD, JPY]
    USD-JPY recovered over 110.00 N.Y. highs, up from near 109.50 at the open. The pairing had been under pressure overnight as U.S./China trade rhetoric and bickering picked up steam. Since the open however, the sharp turnaround in risk taking levels has supported. Wall Street has turned significant opening losses into decent gains,with stock sentiment helped by the record high U. of Michigan consumer sentiment outcome.

    [GBP, USD]
    Cable breached February lows on route to setting a four-month low at 1.2720. The collapse in Brexit negotiations between the UK government and the Labour party has been the latest selling catalyst. While not much of a surprise, it heralds the the beginning of the end of Prime Minister May, who will now find it near impossible to pass a deal through Parliament. Her resignation now looks to be a fait accompli, mostly likely in June, which will lead to a leadership contest in her Tory party. It is not clear what difference a new prime minister could make in the current deeply divided parliament and given the weak position of the Tory party itself, which depends on the support of Northern Ireland's DUP to survive as a minority government. Given this, a strong possibility would be that a new Tory leader with strong Brexiteer credentials, such as Boris Johnson will call a new general election, betting victory on pledging a hard, no-deal Brexit.

    [USD, CHF]
    EUR-CHF steadied in the upper 1.12s in N.Y. on Friday. SNB's Moser said on Wednesday that higher rates would trigger CHF appreciation. The SNB Alternate Governing Board Member said during a panel discussion that in his view "if we had higher interest rates then we would have a stronger exchange rate", something the central bank is eager to prevent. The cross continues to be influenced by EUR-USD movement and the geopolitical risk backdrop.

    [USD, CAD]
    USD-CAD printed seven-session highs of 1.3513 early in North America, coming from overnight lows of 1.3457 seen in early Asian dealings. General USD strength along with the return of U.S./China trade related risk-off conditions has seen the pairing head higher, while oil prices have eased from their best levels, providing support as well. The pairing later fell toward 1.3435 lows as the U.S. is reportedly set to remove steel and aluminum tariffs on Canada and Mexico. This suggests USMCA ratification can now follow, as that's been a major issue.

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    By xemarketanalysis May 17, 2019 10:41 am
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      xemarketanalysis Posts: 668
      XE Market Analysis: Brexit, Act IV, Scene IV: The Exitus of PM Theresa May

      OVERVIEW

      • The British Pound Plummets to a four-month low after Brexit cross-party talks break down.

      • The US dollars keeps a firm tone, shrugging off reports that US-Sino trade talks are off the table

      • NYMEX WTI crude adds 25 cents or up 0.45% to settle $63.50 a barrel

         

      HIGHLIGHT

      The British Pound comes in the line of fire again after reports emerged that there we no agreement on way forward for the Brexit plan. PM May is now expected to resign irrespective of the outcome of the fourth vote. The market is currently pricing in a do-deal exit and sentiment turning bearish for the GBP/USD.

      US DOLLAR

      The war of words on trade escalates between China and the US. Latest media reports suggest that the relationship is likely getting a little more strained before officials from both sides resume negotiations. In the meantime, the market is being driven by risk-averse sentiment. 

       
      The US dollar consolidated around a two-week high against most major currencies. Traditional safe-haven currencies are still the flavour of the day with the Yen surging 0.2%. There is little in the economic docket for today. FOMC Clarida speaks later on Fed’s policy strategy, tools and practices but is unlikely to sway the market’s attention away from the ongoing trade tussles. 

      BRITISH POUND

      GBP/USD crashes below the key 1.28 level after cross-party talks failed to reach an agreement on the Brexit plan. The market is disappointed with the outcome, and political struggles fail, again, to deliver despite earlier claims of “constructive” talks. PM May is now widely expected to resign but not before putting her Plan for another vote in the House of Commons. The Pound is currently searching a new bottom following the latest developments.

      EURO

      EUR/USD falls to its lowest levels in two weeks, after media reports pointed out that Chinese officials may be pulling out of trade talks with the US. 

      Escalation of trade tensions increases uncertainty for global trading partners and takes precedence over economic data. Inflation in the EU area rose to 1.7% in April, up from 1.4% in March. Inflation is slowly converging towards the 2% goal set by the ECB and may come into play in the medium term.

      CANADIAN DOLLAR

      The Market approaches the Canadian long weekend with the USD/CAD slowing chipping off at the 1.35 handle. WTI NYMEX is firming near $63.55 a barrel, 0.80% higher on the day and exerting some support to the CAD. The Bank of Canada believes the risk for the domestic financial system has increased slightly since June of last year in part due to uncertainty from global trade policy.

      AUSTRALIAN DOLLAR

      The AUD has experienced a challenging week, and is clinging to levels around 0.69 but is threatening to hit year-long lows. Fortunately, there aren't any new data releases today heading into the weekend. The US-China trade war and tariff volleys aren't doing the AUD or NZD any favours this week, or year for that matter. 

      FEATURED CURRENCY

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      By XE Market Analysis May 17, 2019 6:56 am
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        XE Market Analysis Posts: 4294
        XE Market Analysis: North America - May 17, 2019

        The Dollar posted fresh highs against the Euro, Sterling, which saw fresh selling on Brexit news, and the Australian Dollar, among other currencies, extending gains seen after Fed's Brainard's said yesterday that "opportunistic reflation" could be encouraged by allowing inflation to run above the 2% target for some years. The Yen has also been firming, finding safe haven demand as European equity markets and S&P 500 futures turned lower as both the Trump administration and China turn to patriotic-rousing messaging in a clear sign of deepening tensions on trade. China's state-backed People’s Daily, for instance, used front-page commentary to assert the trade war would never bring China down. USD-JPY, after yesterday climbing briefly above 110.0 on the back of Brainard's comments, sank back to a 109.55 low in Tokyo today. EUR-JPY ebbed to a two-day low, while AUD-JPY tested four-and-a-half-month lows. GBP-JPY also hit fresh trend lows, aided by continued Brexit-related underperformance of the pound. EUR-USD, meanwhile, carved out a two-week low at 1.1158. Cable printed a new three-month low at 1.2754, and AUD-USD a four-and-a-half-month low at 0.6872. Regarding the Pound, there was news that negotiations between the government and Labour have collapsed, with a Labour member telling Reuters that "there is zero chance of reaching an agreement," and "we can't do a deal with a government that is about to collapse." This won't be much of a surprise as there had been many indications this was where things were heading, though has provided the bearish market with a fresh cue to sell.

        [EUR, USD]
        EUR-USD posted a fresh two-week low at 1.1158, racking this up as the pair's fourth consecutive day of lower lows. The move has largely reflected Dollar gains, which have been dominant since Fed's Brainard's said yesterday that "opportunistic reflation" could be encouraged by allowing inflation to run above the 2% target for some years. His remarks followed above-forecast U.S. housing starts data and a solid Philly Fed Federal manufacturing survey. How the dollar performs during what we assume will be a new phase of heightened trade tensions between the U.S. and China will be a key determinant of EUR-USD's directional bias. If previous episodes of tensions over the last year are anything to go by, the U.S. currency may continue to firm against the euro, being apt to perform as a liquid safe haven currency during phases of risk-off positioning in global markets. Big picture, we view EUR-USD as remaining in a bear trend which has been evolving since early 2018. The pair had been in a rebound phase over the last couple of weeks after posting trend lows in both March and April. Resistance comes in at 1.1200-05.

        [USD, JPY]
        USD-JPY, after yesterday climbing briefly above 110.0 on the back of hawkish-leaning remarks from Fed's Brainard, sank back to the mid 109.0s today. EUR-JPY concurrently ebbed to a two-day low, while AUD-JPY tested four-and-a-half-month lows. GBP-JPY also hit fresh trend lows, aided by continued Brexit-related underperformance of the pound. The price dynamic has largely reflected a richening in the Yen's safe haven premium as stock markets sputtered lower in Asia and Europe. Forex markets overlooked remarks by BoJ Governor Kuroda who said the ultra-low rates may be maintained for well over a year. While Wall Street managed to closed higher yesterday on the back of solid corporate earnings and above-forecast U.S. data, the trade war between the U.S. and China looks to be deepening. China's state-backed People’s Daily used front-page commentary to raise patriotic spirits, saying the trade war would never bring China down. The MSCI Asia-Pacific (ex-Japan) index declined by 0.1%, and was just above a 15-week low and down by about 2% on the week. Assuming that the U.S.-China trade war both deepens and persist, as is starting to look likely, this would likely set the Yen up for bouts of outperformance in the weeks and months ahead. USD-JPY has support at 109.02-05, and resistance at 110.05-08.

        [GBP, USD]
        Sterling has taken a dive on Brexit news, specifically that negotiations between the government and Labour have collapsed, with a Labour member telling Reuters that "there is zero chance of reaching an agreement," and "we can't do a deal with a government that is about to collapse." This won't be much of a surprise as there had been many indications this was where things were heading, though has provided the bearish market with a fresh cue to sell. Cable has printed a three-month low at 1.2754, and the pound is at new trend lows against the euro and other currencies. Prime Minister May's resignation now looks to be a fait accompli, most likely in June, and her Tory party will stage a leadership context at a difficult time, and it is not clear what difference a new prime minister could make in the current deeply divided parliament and given the weak position of the party itself, which depends on the support of Northern Ireland's DUP to survive as a minority government. One possibility is that a new leader, with strong Brexiteer credentials, such as Boris Johnson, might call a new general election, betting victory on pledging a hard, no-deal Brexit. The prolonged political uncertainty should keep the pound on a downward path. Cable has support at 1.2710-12.

        [USD, CHF]
        EUR-CHF posted a five-week low at 1.1264 this week, correcting over half of the gains seen during the pronounced rally that was seen in April. Concerns about Eurozone growth and political situation have been exerting an influence on the Euro and EUR-CHF cross. Italy's deputy prime minister this week said the country would break EU budget rules on debt if necessary to spark employment. The SNB's Alternate Governing Board Member Moser said during a panel discussion yesterday that in his view "if we had higher interest rates then we would have a stronger exchange rate", something the central bank is eager to prevent. The SNB continues to bank on the combination of a negative deposit rate and the threat of ad hoc currency intervention to keep the CHF under control, while trying to limit the impact of the negative rates on the domestic economy with the help of macroprudential instruments. Moser said so far the risks in the Swiss real estate sector remain bearable, although he admitted that in the current environment these could increase. EUR-CHF has resistance at 1.1320-23.

        [USD, CAD]
        USD-CAD has continued to oscillate in a range contained by 1.3400 and 1.3500, consolidating below the recent trend peak at 1.3521. The pair yesterday lifted from a 1.3400 low, underpinned by a rise in U.S. yields after Fed's Brainard said that "opportunistic reflation" could be encouraged by allowing inflation to run above the 2% target for some years. This offset Canadian Dollar gains that had been seen amid the recent rise in oil prices. Overall, we expect USD-CAD to remain upwardly biased, which has been the case since October 2017. Support comes in at 1.3400-05.

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        By XE Market Analysis May 17, 2019 3:55 am
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          XE Market Analysis: Europe - May 17, 2019

          Both the Dollar and Yen have traded generally firmer, the former underpinned by a rise in U.S. yields, particularly a relatively sharp spike in the 2-year note yield, after Fed's Brainard said that "opportunistic reflation" could be encouraged by allowing inflation to run above the 2% target for some years, and the latter by risk aversion as stock markets in Asia sputtered. Forex markets overlooked remarks by BoJ Governor Kuroda who said the ultra-low rates may be maintained for well over a year. USD-JPY, after yesterday climbing briefly above 110.0 on the back of Brainard's comments, sank back to a 109.55 low in Tokyo today. EUR-JPY ebbed to a two-day low, while AUD-JPY tested four-and-a-half-month lows. GBP-JPY also hit fresh trend lows, aided by continued Brexit-related underperformance of the pound. EUR-USD, meanwhile, consolidated in the upper 1.1100s, above yesterday's 10-day low at 1.1166. Cable printed a new three-month low at 1.2782, and AUD-USD a four-and-a-half-month low at 0.6879. The mood in equity markets has been turning negative. Wall Street managed to closed higher yesterday on the back of solid corporate earnings and above-forecast U.S. data, but the trade war between the U.S. and China looks to be deepening. China's state-backed People’s Daily used front-page commentary to raise patriotic spirits, saying the trade war would never bring China down. The MSCI Asia-Pacific (ex-Japan) index declined by 0.1%, and was just above a 15-week low and down by about 2% on the week. The Yuan fell below 6.9000 to the dollar.

          [EUR, USD]
          EUR-USD has been consolidating in the upper 1.1100s, above yesterday's 10-day low at 1.1166. The low was the product of Dollar strength after amid a rise in U.S. yields, particularly a relatively sharp spike in the 2-year note yield, after Fed's Brainard said that "opportunistic reflation" could be encouraged by allowing inflation to run above the 2% target for some years. His remarks followed above-forecast U.S. housing starts data and a solid Philly Fed Federal manufacturing survey. How the dollar performs during what we assume will be a new phase of heightened trade tensions between the U.S. and China will be a key determinant of EUR-USD's directional bias. If previous episodes of tensions over the last year are anything to go by, the U.S. currency may continue to firm against the euro, being apt to perform as a liquid safe haven currency during phases of risk-off positioning in global markets. Big picture, we view EUR-USD as remaining in a bear trend which has been evolving since early 2018. The pair had been in a rebound phase over the last couple of weeks after posting trend lows in both March and April. Resistance comes in at 1.1200-05.

          [USD, JPY]
          USD-JPY, after yesterday climbing briefly above 110.0 on the back of hawkish-leaning remarks from Fed's Brainard, sank back to a 109.55 low in Tokyo today. EUR-JPY ebbed to a two-day low, while AUD-JPY tested four-and-a-half-month lows. GBP-JPY also hit fresh trend lows, aided by continued Brexit-related underperformance of the pound. The price dynamic has largely reflected a richening in the Yen's safe haven premium as stock markets in Asia sputtered. Forex markets overlooked remarks by BoJ Governor Kuroda who said the ultra-low rates may be maintained for well over a year. While Wall Street managed to closed higher yesterday on the back of solid corporate earnings and above-forecast U.S. data, the trade war between the U.S. and China looks to be deepening. China's state-backed People’s Daily used front-page commentary to raise patriotic spirits, saying the trade war would never bring China down. The MSCI Asia-Pacific (ex-Japan) index declined by 0.1%, and was just above a 15-week low and down by about 2% on the week. Assuming that the U.S.-China trade war both deepens and persist, as is starting to look likely, this would likely set the Yen up for bouts of outperformance in the weeks and months ahead. USD-JPY has support at 109.02-05, and resistance at 110.05-08.

          [GBP, USD]
          Cable printed a new three-month low at 1.2782, and GBP-JPY also hit fresh trend lows, amid continued Brexit-related underperformance of the pound. Cable has now declined for a sixth consecutive day and has fallen in nine of the last 10 trading days. Prolonged political uncertainty and the increasingly evident impact of this on the UK economy has generated a negative view of the pound in forex markets. Talks between the government and the Labour Party aimed at coming to a compromise on Brexit appear to be going nowhere, Prime Minister May is under intense pressure from her own party to step down, recent local elections showed a severe haemorrhage in support for both the Tory and Labour parties, and the newly created Brexit Party, which favours a no-deal exit from the EU, is riding high in polling ahead of elections for seats in the European Parliament on May 23. May has promised to step down in the event that she loses a parliamentary Brexit vote scheduled for early June, which would spark a distracting leadership contest at a crucial time (May's likely replacement would be a stronger Brexiteer, but they, like May, would still have a hard time getting a Brexit deal through Parliament, or implementing a no-deal exit). Amid this backdrop, British Steel yesterday asked the government for a loan to cover "Brexit-related issues." Markets are right to be somewhat rattled. Our hunch is that there will be another referendum at some point. We have been advising trend following Cable. Resistance comes in at 1.2875-78.

          [USD, CHF]
          EUR-CHF posted a five-week low at 1.1264 this week, correcting over half of the gains seen during the pronounced rally that was seen in April. Concerns about Eurozone growth and political situation have been exerting an influence on the Euro and EUR-CHF cross. Italy's deputy prime minister this week said the country would break EU budget rules on debt if necessary to spark employment. The SNB's Alternate Governing Board Member Moser said during a panel discussion yesterday that in his view "if we had higher interest rates then we would have a stronger exchange rate", something the central bank is eager to prevent. The SNB continues to bank on the combination of a negative deposit rate and the threat of ad hoc currency intervention to keep the CHF under control, while trying to limit the impact of the negative rates on the domestic economy with the help of macroprudential instruments. Moser said so far the risks in the Swiss real estate sector remain bearable, although he admitted that in the current environment these could increase. EUR-CHF has resistance at 1.1320-23.

          [USD, CAD]
          USD-CAD has continued to oscillate in a range contained by 1.3400 and 1.3500, consolidating below the recent trend peak at 1.3521. The pair yesterday lifted from a 1.3400 low, underpinned by a rise in U.S. yields after Fed's Brainard said that "opportunistic reflation" could be encouraged by allowing inflation to run above the 2% target for some years. This offset Canadian Dollar gains that had been seen amid the recent rise in oil prices. Overall, we expect USD-CAD to remain upwardly biased, which has been the case since October 2017. Support comes in at 1.3400-05.

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          By XE Market Analysis May 16, 2019 3:25 pm
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            XE Market Analysis Posts: 4294
            XE Market Analysis: Asia - May 16, 2019

            Solid incoming U.S. data helped the Dollar firm up in N.Y. on Thursday, taking the DXY to two-week highs of 97.83. Jobless claims, housing starts and the Philly Fed index all beat consensus forecasts. Wall Street rallied, and Treasury yields bounced off trend lows. EUR-USD fell to 1.1172 lows from near 1.1210, as USD-JPY rallied toward 110.00 on risk-on conditions. USD-CAD stayed firm, rallying to 1.3469 highs late in the session. Cable under performed yet again, dropping to fresh three-month lows of 1.2373 before recovering some.

            [EUR, USD]
            EUR-USD fell to eight-session lows of 1.1172 at mid-morning, slipping from opening highs near 1.1210. The early round of Dollar friendly U.S. data saw the pairing start its decent, with selling pick up some pace on the break under the 20-day moving average of 1.1197. The May 7 low of 1.1167 is the next support level, with a break there opening the door for a test of the May 3 low of 1.1135. Ongoing U.S./China trade angst should keep safe-haven Dollar buying flows in vogue on bouts of risk aversion going forward.

            [USD, JPY]
            USD-JPY edged up to highs of the week, topping at 109.88 in early trade, up from opening lows of 109.60. The firmer Wall Street open, along with decent incoming U.S. data this morning were the drivers of the modest rally. Trade angst between the U.S. and China remains as background noise, which will likely limit USD-JPY's upside potential for now. Resistance comes at the psych 110.00 level. The pairing later topped at 109.97 in line with solid Wall Street gains.

            [GBP, USD]
            Cable's low was 1.2773 in what is now the fifth consecutive daily decline and the eighth down day out of the last nine trading days, and a fresh three-month low. Prolonged political uncertainty and the increasingly evident impact of this on the UK economy has generated a negative view of the pound in forex markets. Talks between the government and the Labour Party aimed at coming to a compromise on Brexit appear to be going nowhere, Prime Minister May is under intense pressure from her own party to step down, recent local elections showed a severe haemorrhage in support for both the Tory and Labour parties, and the newly created Brexit Party, which favours a no-deal exit from the EU, is riding high in polling ahead of elections for seats in the European Parliament on May 23. May has promised to step down in the event that she loses a parliamentary Brexit vote scheduled for early June.

            [USD, CHF]
            EUR-CHF attempted to recover from one-month lows of 1.1264 seen on Wednesday, topping over 1.1315, before again fading, as risk taking levels improved. The lows came amid renewed risk-off position in global markets as tensions between the U.S. and China on trade ratchet higher, which seemed to have rekindled the Franc's safe haven appeal, despite the SNB's -0.75% deposit rate. EUR-CHF has support at 1.1320-23. SNB's Moser said on Wednesday that higher rates would trigger CHF appreciation. The SNB Alternate Governing Board Member said during a panel discussion yesterday that in his view "if we had higher interest rates then we would have a stronger exchange rate", something the central bank is eager to prevent.

            [USD, CAD]
            USD-CAD remained relatively firm, despite the decent Canada manufacturing data early in the session, and oil prices back over $63.00. The pairing opened near 1.3410, later peaking at 1.3432, since edging back down under 1.3420. A broadly stronger U.S. Dollar stymied CAD bulls, with the Dollar index up at two-week highs of 97.83. Later, the pairing ran up to 1.3469 as oil prices turned lower.

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            By xemarketanalysis May 16, 2019 1:15 pm
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              xemarketanalysis Posts: 668
              XE Market Analysis: Trifecta of Strong Domestic Data Buoys the US Dollar

              OVERVIEW

              • The DXY Index near a two-week high on the back of optimism within the manufacturing sector

              • GBP drops to three-month low as PM May ignored calls for her resignation

              • NYMEX WTI crude gains nearly 1.50%, injecting support to the loonie

              HIGHLIGHT

              USDCAD travelled south of recent trading range after failing to breach key 1.35 handle. Investors are showing cautious optimism despite international trade relations taking a nasty turn. Beijing and Washington have both turn to non-trade measures in tit for tat response to recent trade taxes. 

              The market is hoping a swift resolution to recent steel and aluminium tariffs before officials vote on USMCA. Today, strong performance in the oil futures market and manufacturing sales are supporting the loonie. The pair is however expected to remain inside recent ranges.

              US DOLLAR

              The greenback maintains a positive tone, buoyed by robust domestic data and ignoring escalating trade tensions. Unemployment weekly claims saw a decrease of 16k from the previous week. Building permits beat market consensus and the Philly Fed Manufacturing Index was at 16.6 for May, increasing from a reading of 8.5 in April. 

              The survey sees the continued growth of the coming months, ignoring raging trade tensions with China.  The US dollar index is closing on a two week high as the market continues to digest the incoming data. Trade talks between Beijing and Washington are still at centre stage. New non-tariffs measures between the two parties are expected to inject more uncertainty.

              BRITISH POUND

              GBP/USD skidded to a three-month low with frustrations growing over the ongoing Brexit stasis. The pair is now hanging by a thread around key 1.28 handle and remains under heavy selling pressure. PM May is facing new calls for her resignation, whilst the MPs do not believe a fourth vote for the same exit plan will result in a different outcome.  British politics and global trade tensions are expected to encourage more outflows from the pound.

              EURO

              The Euro is trading flat against the US dollar around recent 1.12 level. The economic calendar is thin, and the market prefers to continue to move with measured optimism. The US Administration has delayed its decision for auto tariffs for another six months. Growing tension in international trade relations will keep the pair inside the consolidation zone.

              CANADIAN DOLLAR

              USD/CAD is meeting stiff resistance near the upper range of the new range and is now trading with a negative bias. The pair is down 0.15% with the Canadian dollar drawing strength from rising oil prices. WTI NYMEX is up nearly 1.5%. Manufacturing sales were also better than market estimates, up 2.1% as per Statistics Canada. The growth was broad-based, with sales up in 12 of 21 industries. The market will now turn its attention to the Bank of Canada Financial System Review report for further trading impetus.

              AUSTRALIAN DOLLAR

              The AUD clings to the 0.69 range despite a higher-than-expected unemployment rate of 5.2 in April. Employment news was mixed in April, as the number of people employed rose by 28,400, which is higher than the 15,000 forecasts. Full-time employment fell by 6,300, and part time employment rose by 34,700. 

              FEATURED CURRENCY

              XE Currency Blog

              Topics6281 Posts6326
              By xemarketanalysis May 16, 2019 1:15 pm
                xemarketanalysis's picture
                xemarketanalysis Posts: 668
                XE Market Analysis: Trifecta of Strong Domestic Data Buoys the US Dollar

                OVERVIEW

                • The DXY Index near a two-week high on the back of optimism within the manufacturing sector

                • GBP drops to three-month low as PM May ignored calls for her resignation

                • NYMEX WTI crude gains nearly 1.50%, injecting support to the loonie

                HIGHLIGHT

                USDCAD travelled south of recent trading range after failing to breach key 1.35 handle. Investors are showing cautious optimism despite international trade relations taking a nasty turn. Beijing and Washington have both turn to non-trade measures in tit for tat response to recent trade taxes. 

                The market is hoping a swift resolution to recent steel and aluminium tariffs before officials vote on USMCA. Today, strong performance in the oil futures market and manufacturing sales are supporting the loonie. The pair is however expected to remain inside recent ranges.

                US DOLLAR

                The greenback maintains a positive tone, buoyed by robust domestic data and ignoring escalating trade tensions. Unemployment weekly claims saw a decrease of 16k from the previous week. Building permits beat market consensus and the Philly Fed Manufacturing Index was at 16.6 for May, increasing from a reading of 8.5 in April. 

                The survey sees the continued growth of the coming months, ignoring raging trade tensions with China.  The US dollar index is closing on a two week high as the market continues to digest the incoming data. Trade talks between Beijing and Washington are still at centre stage. New non-tariffs measures between the two parties are expected to inject more uncertainty.

                BRITISH POUND

                GBP/USD skidded to a three-month low with frustrations growing over the ongoing Brexit stasis. The pair is now hanging by a thread around key 1.28 handle and remains under heavy selling pressure. PM May is facing new calls for her resignation, whilst the MPs do not believe a fourth vote for the same exit plan will result in a different outcome.  British politics and global trade tensions are expected to encourage more outflows from the pound.

                EURO

                The Euro is trading flat against the US dollar around recent 1.12 level. The economic calendar is thin, and the market prefers to continue to move with measured optimism. The US Administration has delayed its decision for auto tariffs for another six months. Growing tension in international trade relations will keep the pair inside the consolidation zone.

                CANADIAN DOLLAR

                USD/CAD is meeting stiff resistance near the upper range of the new range and is now trading with a negative bias. The pair is down 0.15% with the Canadian dollar drawing strength from rising oil prices. WTI NYMEX is up nearly 1.5%. Manufacturing sales were also better than market estimates, up 2.1% as per Statistics Canada. The growth was broad-based, with sales up in 12 of 21 industries. The market will now turn its attention to the Bank of Canada Financial System Review report for further trading impetus.

                AUSTRALIAN DOLLAR

                Content about AUD goes here

                FEATURED CURRENCY

                XE Currency Blog

                Topics6281 Posts6326
                By xemarketanalysis May 16, 2019 1:15 pm
                  xemarketanalysis's picture
                  xemarketanalysis Posts: 668
                  XE Market Analysis: Trifecta of Strong Domestic Data Buoys the US Dollar

                  OVERVIEW

                  • The DXY Index near a two-week high on the back of optimism within the manufacturing sector

                  • GBP drops to three-month low as PM May ignored calls for her resignation

                  • NYMEX WTI crude gains nearly 1.50%, injecting support to the loonie

                  HIGHLIGHT

                  USDCAD travelled south of recent trading range after failing to breach key 1.35 handle. Investors are showing cautious optimism despite international trade relations taking a nasty turn. Beijing and Washington have both turn to non-trade measures in tit for tat response to recent trade taxes. 

                  The market is hoping a swift resolution to recent steel and aluminium tariffs before officials vote on USMCA. Today, strong performance in the oil futures market and manufacturing sales are supporting the loonie. The pair is however expected to remain inside recent ranges.

                  US DOLLAR

                  The greenback maintains a positive tone, buoyed by robust domestic data and ignoring escalating trade tensions. Unemployment weekly claims saw a decrease of 16k from the previous week. Building permits beat market consensus and the Philly Fed Manufacturing Index was at 16.6 for May, increasing from a reading of 8.5 in April. 

                  The survey sees the continued growth of the coming months, ignoring raging trade tensions with China.  The US dollar index is closing on a two week high as the market continues to digest the incoming data. Trade talks between Beijing and Washington are still at centre stage. New non-tariffs measures between the two parties are expected to inject more uncertainty.

                  BRITISH POUND

                  GBP/USD skidded to a three-month low with frustrations growing over the ongoing Brexit stasis. The pair is now hanging by a thread around key 1.28 handle and remains under heavy selling pressure. PM May is facing new calls for her resignation, whilst the MPs do not believe a fourth vote for the same exit plan will result in a different outcome.  British politics and global trade tensions are expected to encourage more outflows from the pound.

                  EURO

                  The Euro is trading flat against the US dollar around recent 1.12 level. The economic calendar is thin, and the market prefers to continue to move with measured optimism. The US Administration has delayed its decision for auto tariffs for another six months. Growing tension in international trade relations will keep the pair inside the consolidation zone.

                  CANADIAN DOLLAR

                  USD/CAD is meeting stiff resistance near the upper range of the new range and is now trading with a negative bias. The pair is down 0.15% with the Canadian dollar drawing strength from rising oil prices. WTI NYMEX is up nearly 1.5%. Manufacturing sales were also better than market estimates, up 2.1% as per Statistics Canada. The growth was broad-based, with sales up in 12 of 21 industries. The market will now turn its attention to the Bank of Canada Financial System Review report for further trading impetus.

                  AUSTRALIAN DOLLAR

                  Content about AUD goes here

                  FEATURED CURRENCY

                  XE Currency Blog

                  Topics6281 Posts6326
                  By xemarketanalysis May 16, 2019 1:15 pm
                    xemarketanalysis's picture
                    xemarketanalysis Posts: 668
                    XE Market Analysis: Trifecta of Strong Domestic Data Buoys the US Dollar

                    OVERVIEW

                    • The DXY Index near a two-week high on the back of optimism within the manufacturing sector

                    • GBP drops to three-month low as PM May ignored calls for her resignation

                    • NYMEX WTI crude gains nearly 1.50%, injecting support to the loonie

                    HIGHLIGHT

                    USDCAD travelled south of recent trading range after failing to breach key 1.35 handle. Investors are showing cautious optimism despite international trade relations taking a nasty turn. Beijing and Washington have both turn to non-trade measures in tit for tat response to recent trade taxes. 

                    The market is hoping a swift resolution to recent steel and aluminium tariffs before officials vote on USMCA. Today, strong performance in the oil futures market and manufacturing sales are supporting the loonie. The pair is however expected to remain inside recent ranges.

                    US DOLLAR

                    The greenback maintains a positive tone, buoyed by robust domestic data and ignoring escalating trade tensions. Unemployment weekly claims saw a decrease of 16k from the previous week. Building permits beat market consensus and the Philly Fed Manufacturing Index was at 16.6 for May, increasing from a reading of 8.5 in April. 

                    The survey sees the continued growth of the coming months, ignoring raging trade tensions with China.  The US dollar index is closing on a two week high as the market continues to digest the incoming data. Trade talks between Beijing and Washington are still at centre stage. New non-tariffs measures between the two parties are expected to inject more uncertainty.

                    BRITISH POUND

                    GBP/USD skidded to a three-month low with frustrations growing over the ongoing Brexit stasis. The pair is now hanging by a thread around key 1.28 handle and remains under heavy selling pressure. PM May is facing new calls for her resignation, whilst the MPs do not believe a fourth vote for the same exit plan will result in a different outcome.  British politics and global trade tensions are expected to encourage more outflows from the pound.

                    EURO

                    The Euro is trading flat against the US dollar around recent 1.12 level. The economic calendar is thin, and the market prefers to continue to move with measured optimism. The US Administration has delayed its decision for auto tariffs for another six months. Growing tension in international trade relations will keep the pair inside the consolidation zone.

                    CANADIAN DOLLAR

                    USD/CAD is meeting stiff resistance near the upper range of the new range and is now trading with a negative bias. The pair is down 0.15% with the Canadian dollar drawing strength from rising oil prices. WTI NYMEX is up nearly 1.5%. Manufacturing sales were also better than market estimates, up 2.1% as per Statistics Canada. The growth was broad-based, with sales up in 12 of 21 industries. The market will now turn its attention to the Bank of Canada Financial System Review report for further trading impetus.

                    AUSTRALIAN DOLLAR

                    Content about AUD goes here

                    FEATURED CURRENCY

                    XE Currency Blog

                    Topics6281 Posts6326
                    By XE Market Analysis May 16, 2019 7:24 am
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 4294
                      XE Market Analysis: North America - May 16, 2019

                      The Dollar has been trading mixed, losing ground to the Canadian Dollar, which has outperformed amid fresh gains in oil prices on Middle East tensions, while posting fresh trend highs against the Australian Dollar following an unexpected rise in the Australian jobless rate, and the Pound, which continued on a Brexit-related losing streak. EUR-USD, meanwhile, has been idling near 1.1200, above the one-week low seen yesterday at 1.1178, and USD-JPY has been plying a narrow range near 109.50, above the three-month low seen on Monday at 109.02 and unaffected by a Reuters report suggesting that the Japanese government is likely to downwardly revise its economic assessment. Cable printed a three-month low at 1.2820. The pound also posted a three-month versus the Euro, and declined against other currencies. USD-CAD posted a six-day low at 1.3401. The U.S.-China trade spate ratcheted higher after the Trump administration blacklisted China's Huawei, adding it and 70 affiliates to its "Entity List," which will bar the company from acquiring components and technology from U.S. firms without government approval. Beijing fired back, with the Commerce Ministry stating that China will be forced to retaliate "if the US is headstrong on trade" while asserting that the trade dispute's impact on China's economy "is completely manageable." Despite this, European stock markets rose while S&P 500 futures posted a 0.3% gain, reversing out of a 0.2% loss. This followed a mixed session in Asia.

                      [EUR, USD]
                      EUR-USD has been idling near 1.1200, above the one-week low seen yesterday at 1.1178. How the dollar performs during what we assume will be a new phase of heightened trade tensions between the U.S. and China will be a key determinant of EUR-USD's directional bias. If previous episodes of tensions over the last year are anything to go by, the U.S. currency may continue to firm against the euro, being apt to perform as a liquid safe haven currency during phases of risk-off positioning in global markets. Big picture, we still view EUR-USD as remaining in a bear trend which has been evolving since early 2018. The pair had been in a rebound phase over the last couple of weeks after posting trend lows in both March and April. Resistance comes in at 1.1264-65.

                      [USD, JPY]
                      USD-JPY has been plying a narrow range near 109.50, above the three-month low seen on Monday at 109.02. The Japanese government is set on downwardly revising its economic assessment, according to a Reuters report, citing an unnamed source, although to little impact on the Yen. We anticipate that the Japanese currency will be apt to appreciate in bouts over the coming months, assuming that the U.S.-led trade war will remain intense. While President Trump is clearly wanting to placate investor concerns about its trade war as much as possible, stressing that dialogue remains open with China, with the U.S. economy strong and over a year to go before the 2020 presidential election, we anticipate the Trump administration will continue to play hardball with China on trade. This in turn suggests markets will remain on a volatile path. USD-JPY has support at 109.02-05, and resistance at 110.05-08.

                      [GBP, USD]
                      Sterling has resumed its losing streak, posting fresh three-month lows against both the dollar and euro. Cable's low is 1.2821 in what is now the fifth consecutive daily decline and the eighth down day out of the last nine trading days. The pound is showing an average decline of 1.5% versus the dollar, euro and yen from week-ago levels, though is still up by an average 1.3% against these currencies on the year-to-date. Brexit is to blame, although there have been no substantive new developments. UK Prime Minister May yesterday announced there would be another parliamentary vote on Brexit in early June, to which Labour and other opposition parties promptly said that they will vote it down unless, in the case of Labour, the vote is on a cross-party deal, which at this juncture looks unlikely (the government and Labour remain in negotiations). May, herself under pressure to step down, said that if Parliament fails to agree on a Brexit deal in June, then the choice will be between a no-deal Brexit or remaining in the EU. This comes with the newly established Brexit Party, which favours a no-deal exit from the EU, running high in the polls. This has rattled markets somewhat. EU parliamentary elections on May 23 will be viewed by markets a proxy vote on a second Brexit referendum, if there is to be one (which is looking increasingly likely). The prolonged political uncertainty, meanwhile, has been having an erosive impact on the UK economy, particularly in business investment. British Steel, for instance, today asked the government for a loan to cover "Brexit-related issues." We have been advising trend following Cable. Resistance is at 1.2875-78.

                      [USD, CHF]
                      EUR-CHF, in this week posting a five-week low at 1.1264, has corrected over half of the gains seen during the pronounced rally that was seen in April. Concerns about Eurozone growth and political situation have been exerting an influence on the Euro and EUR-CHF cross. Italy's deputy prime minister this week said the country would break EU budget rules on debt if necessary to spark employment. The SNB's Alternate Governing Board Member Moser said during a panel discussion yesterday that in his view "if we had higher interest rates then we would have a stronger exchange rate", something the central bank is eager to prevent. The SNB continues to bank on the combination of a negative deposit rate and the threat of ad hoc currency intervention to keep the CHF under control, while trying to limit the impact of the negative rates on the domestic economy with the help of macroprudential instruments. Moser said so far the risks in the Swiss real estate sector remain bearable, although he admitted that in the current environment these could increase. EUR-CHF has resistance at 1.1320-23.

                      [USD, CAD]
                      USD-CAD has ebbed from the upper 1.3400s to the lower 1.3400s over the last day. The move has been concomitant with a rise in oil prices and stabilisation in equity markets following placating remarks from the Trump administration on the trade front. Overall, we expect USD-CAD to remain upwardly biased, which the pair has been since October 2017, anticipating a revisit, and break above, the recent trend peak at 1.3521. Support comes in at 1.3400-05.

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