XE Market Analysis: Europe - Dec 02, 2014 The dollar majors remained within yesterdays ranges for the most part, though AUD-USD was an exception in rallying to a two-day high of 0.8542 following a lower than expected current account deficit in Q3 data and higher than expected October building approvals data for October. The data helped offset an increased emphasis on wish for a lower AUD from the RBA following its policy meeting today, which left the interest rate at 2.5% while signalling that a long period of stable rates is likely. Elsewhere, USD-JPY treaded water in the mid-to-upper 118s, holding not far from yesterdays seven-year peak at 119.14. The JGB 5-year yield fell to a record low, despite yesterdays sovereign debt rating downgrade by Moodys. This backdrop, plus political risk into the Dec-14 election, should keep the yen broadly under pressure. EUR-USD held in the mid-1.24s, ebbing back under the 20-day moving average at 1.2470. [EUR, USD] The euros upside is likely to remain curtailed into Thursdays ECB meeting, with key members, including Draghi, Constancio and Coeure, having recently signalled openness to further policy expansion. EUR-USD support is marked at 1.2400-02 and 1.2358 (Nov-6 low), which is the lowest level traded since August 2012, and resistance is at 1.2470-80 (which encompasses the 20-day moving average) and 1.2500-06 (which encompasses yesterdays high). We are looking for an eventual move on the July 2012 low at 1.2042 on the driver of diverging Eurozone and U.S. economic growth. [USD, JPY] USD-JPY treaded water in the mid-to-upper 118s, holding not far from yesterdays seven-year peak at 119.14. The JGB 5-year yield fell to a record low, despite yesterdays sovereign debt rating downgrade by Moodys. This backdrop, plus political risk into the Dec-14 election, should keep the yen broadly under pressure. Incoming data out of Japan have reflected the disappointing recovery that caused the BoJ to announce another round of massive stimulus at the end of October, while PM Abes rush for a new mandate for Abenomics (elections to be held Dec-14) has been driving yen weakness. We anticipate that USD-JPY will be trading on a 120 handle before long. [GBP, USD] Sterling has consolidated gains seen Monday following a set of net-positive U.K. data, with consumer borrowing rising at quickest rate since 2006 and the Markit manufacturing PMI unexpectedly improving to 53.5 from 53.2. Overall, Cable looks to have established equilibrium in the mid-to-upper 1.50s after a five-month decline from highs near 1.7200. Resistance is marked at 1.5760-64, and support is at 1.5648-50. [USD, CHF] EUR-CHF is trading slightly higher, near 1.2030, after Switzerlands rejection of the Save our Swiss gold referendum on Sunday. The impact hasnt been great as polls had accurately portended the outcome of the referendum. The SNB welcomed the outcome as the central bank had been earnestly arguing that the plan to significantly increase gold reserves would jeopardise the defence of the 1.2000 cap in EUR-CHF and so increase the risk of deflation taking hold. The SNB now has a bit of space between spot levels and its rumoured buffer zone between 1.2010 to 1.2000. SNBs Zurbruegg recently pledged that the 1.2000 franc cap will be defended with utmost determination as the bank is prepared to buy an unlimited amount of FX and take further measures immediately if needed. [USD, CAD] USD-CAD has steadied in the mid-1.13s after logging a three-week high of 1.1459 yesterday amid the oil price rout. We still anticipate a move on 1.1500 in USD-CAD. Support is marked at 1.1293-1.1300.
Posted on: Tue, 02 Dec 2014 09:02:36 +0000
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