FX Weekly Update – December 11th, 2023

Posted Under: Weekly updates

The U.S. economy added 199K non-farm jobs last month and the unemployment rate fell to 3.7%. Interest rates stopped their slide and firmed up after the economic release. The rise in rates was supportive of the U.S. dollar. Pressure on foreign currencies continues; several currencies, like the EUR and the GBP, have not found a support level to bounce from. This week, the focus will remain on inflation with the release of CPI and PPI and the Fed will also announce interest rate decision when most economists do not expect them to make any adjustments. Any indication that prices are going back up will risk both interest rates and the U.S. dollar moving higher.

EUR (1.0765): The soft euro has yet to experience a meaningful rally for several trading sessions. From a technical perspective the current support levels of 1.0720 and 1.0650 have held. A bounce to 1.0850 would not change the recent weakness. A jump to that area would be a good selling opportunity. There remains an outside chance of the single-currency falling to 1.0250.

GBP (1.2540): The Sterling has more room to fall. After weeks of remaining in a tight range the pound has had sellers keep constant pressure on GBP/USD and GBP/crosses. The target level, derived from the double top on short-term charts, is 1.2350. Support is 1.2450 and resistance is 1.2615. This week’s economic reports include various industrial production numbers, followed by the BoE’s rate decision. Similar to other central banks there is no expectation of a change.

JPY (145.50): USD/JPY fell to 141.60 as quickly as it has recovered. Liquidation of JPY cross currency positions was one factor behind the move. The main reason is the BoJ’s upcoming decision on its interest rate move. Some economists believe they will raise rates to 0.00% (currently -0.1%). This would narrow the spread between this currency pair and favor yen buyers.

CAD (1.3590): Oil price dipped below $70/bbl before “recovering” to the current $71. The U.S. is now the 5th largest oil exporter offsetting the oil output cuts by OPEC+. The Canadian dollar did rally against the U.S. dollar early last week, but by Friday the Canadian dollar had weakened back to the current level. Resistance is at 1.3800 and 1.4000.

MXN (17.3500): There is little change in USD/MXN. The current consolidation area will test the 17.8000 level before falling to 16.5000. The U.S. economy remains strong, which puts pressure on the currency pair. The stronger dollar offsets the peso buying, leaving the currency pair in small ranges.

CNH (17.1800): The PBOC has achieved a lot in the last 12 months. The market is weighing the Chinese economic situation while considering that fighting the PBOC could be expensive. 7.16-7.21 will define the range for USD/CNY for the next several weeks.