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18th of November 2018

Forex



XE Market Analysis: Europe - Nov 05, 2018

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. Elsewhere, USD-JPY has remained within a 25 pip range so far today in typically directionless early-week trading. The range has been 113.10 to 113.33. The high is still the highest level seen since last Wednesday. EUR-USD has been plying a narrow range just under 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 advance of the Eurosceptic populist movement in Europe will remain on the worry list for investors with exposure to the Euro. There has been a bearish mood across stock market bourses in Asia amid a combo of more 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 Xi pledging lower tariffs and increased market access. The 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. has also been in the mix.

[EUR, USD]EUR-USD has been plying a narrow range just under 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 has remained within a 25 pip range so far today in typically directionless early-week trading. The range has been 113.10 to 113.33. The high is still the highest level seen since last Wednesday. Most Yen crosses have been similarly directionally challenged, 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. Market participants will remain focused on Brexit news, with details needed with regard to the apparent breakthrough. Remaining part of the customs union would be a concession too far for Eurosceptic members of Prime Minister's Conservative party, but seems to fit the mood of the population, although there would be no guarantee that such a deal would pass 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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