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18th of November 2018

Forex



XE Market Analysis: North America

Mostly narrow ranges have prevailed so far today, though Sterling managed to break higher on news that a Brexit deal may be on the cards. USD-JPY edged out a three-session high at 113.33, while most Yen crosses have remained within their respective Friday ranges. GBP-JPY was an exception, rallying to a two-week high. EUR-USD has been plying a narrow range just 1.1400, a level that approximately marks the midway point of the range that's been seen over the last 10 days or so. The Pound lifted on a report that the EU and UK are close to making a deal on Brexit, which will reportedly involve keeping the UK in the customs union, according to sources cited by the Sunday Times. Cable posted a high of 1.3025 in opening trade in New Zealand after closing Friday at 1.2065, while EUR-GBP ebbed to two-week lows. Remaining part of the customs union would be a concession too far for Eurosceptic members of Prime Minister's Conservative party, but there might be offsetting support from some Labour MPs when it comes to a vote in parliament. Risk appetite remained fragile, with Asian markets closing lower, while most European bourses posted modest gains during the AM session. A combo of re-committed Fed rate hike expectations following Friday's strong U.S. employment report, and more pessimism about the odds for a cooling in China-U.S. trade warring anytime soon, despite China's President Xi today pledging to lower tariffs and increase market access. The is also a risk that Trump's pro-stock market policies will be halted in their tracks should the Democratic Party wrest control of the House of Representatives at tomorrow's midterm elections.

[EUR, USD]EUR-USD has been plying a narrow range just 1.1400, a level that approximately marks the midway point of the range that's been seen over the last 10 days or so. We remain bearish of EUR-USD with signs of flagging economic growth momentum in the Eurozone, along with concerns about the Eurosceptic political movement, juxtaposing a U.S. economy in relative health, as evidenced by Friday's October employment report. EUR-USD resistance comes in at 1.1462-65.

[USD, JPY]USD-JPY edged out a three-session high at 113.33. Most Yen crosses have remained within their respective Friday ranges, though GBP-JPY rallied to a two-week high on a report that the EU and UK are close to making a deal on Brexit. BoJ Governor Kuroda said that the era of ultra-stimulus won't continue, but qualified this by putting the remarks in context of the next decade while emphasizing that the 2% inflation target, the chronic undershooting of which obliges the BoJ to maintain accommodative policy, should remain. Stock markets remain fragile, with Asian bourses down amid a combo of re-committed Fed rate hike expectations following Friday's strong employment report, and more pessimism about the odds for a cooling in China-U.S. trade warring anytime soon, despite China's President Xi today pledging to lower tariffs and increase market access. The is also a risk that Trump's pro-stock market policies will be halted in their tracks should the Democratic Party wrest control of the House of Representatives at tomorrow's midterm elections in the U.S. USD-JPY's fundamentals (yield differentials and the associated contrast between Fed and BoJ policy paths) remain supportive, although periodic episodes of risk aversion has been an intermittent offsetting bearish force. USD-JPY has support at 112.35-37.

[GBP, USD]The Pound lifted on a report that the EU and UK are close to making a deal on Brexit, which will reportedly involve keeping the UK in the customs union (according to sources cited by the Sunday Times). Cable posted a high of 1.3025 in opening trade in New Zealand after closing Friday at 1.2065, while GBP-JPY rallied to a two-week high and EUR-GBP to a two-week low. Remaining part of the customs union would be a concession too far for Eurosceptic members of Prime Minister's Conservative party, but there might be offsetting support from some Labour MPs when it comes to a vote in parliament. Cable has been chopping around the 1.3000 level for about two months now, and more of the same looks likely. Support comes in at 1.2918-20.

[USD, CHF]EUR-CHF has recouped back above 1.1400, recovering rom the five-week printed at 1.1355 in late October, which extended a descent from levels above 1.1500. The cross has support at 1.1405-10.

[USD, CAD]USD-CAD has settled around 1.3100, above the 11-day low seen on Friday at 1.3049 and below the two-month high see last Wednesday at 1.3170. Fresh seven-month lows in oil prices today, coupled with Friday's miss in Canada's October jobs report, which contrasted with the strong U.S. jobs report for the same month, should keep USD-CAD underpinned. USD-CAD has support at 1.3049-50, and resistance at 1.3137-40.

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