FX Weekly Update – December 18th, 2023

Posted Under: Weekly updates

The rollercoaster called foreign exchange earned its reputation last week. The Fed, ECB, and BoE left their rates unchanged, but each had a dovish statement. Because the Fed was the first to report last week, the dollar was sold. And sold hard, it was. There were no currencies that weakened against the dollar. The euro and pound were sold on Friday after the BoE and ECB released their statements. By the end of the week, the dollar was unchanged.

EUR (1.0895): The daily chart has a potential double top. The top may be in with last week’s rally to 1.0109 and the quick reversal. Critical support is at 1.0750. A close below that level would confirm the double top. The measuring objective would be 1.0500. Three ECB governors will be speaking this week and the markets will focus on these speeches, looking for any indication that the ECB will cut rates sooner rather than later.

GBP (1.2685): The pound traded to 1.2800 twice last week. The reversal to the current level has not changed the view that the GBP remains in a positive trend. Several economic reports may have an impact on the GBP. PPI, GDP, and retail sales will provide insight into the health of the UK economy. Support is at 1.2450, resistance at 1.2800 and 1.3000.

JPY (142.75): The yen benefited from the weak dollar and printed 140.95, the highest level since July 21. Tonight, the BoJ will announce its rate decision when the market expects it to raise the overnight rate to 0.00% from its current rate of -0.1%. This minor change has already had a meaningful difference in the yen’s strength. Resistance is at 143.10 and 1.4400. Support is at 142.00 and 141.50.

CAD (1.3380): Oil fell to $68, and the Canadian dollar grew more robust. That was last week, but we do not see a change in that action. The Canadian economy is doing well. Oil prices are low, but Canada (and the US) is filling the shortage. Employment is strong, inflation is settling down, and Canada is pumping oil—three reasons for the rally in the Canadian dollar. Support for USD/CAD is at 1.3350 and 1.3225.

MXN (17.2300): The peso is the one currency that was not as impacted by last week’s roller coaster ride. The Mexican economy is growing, and the increased demand from the US economy is behind the strength. We expect more range trading for USD/MXN. 16.8000 – 17.8000.

CNH (7.1250): The Chinese economy has improved, according to Chinese media. The PBoC has been fixing its currency higher each day. The next logical level for USD/CNH is 6.7000.