The dollar rebounded from Asia-session losses, led by a sharp rally in USD-CHF, which broke up an otherwise subdued session. USD-CHF suddenly surged by some 0.7% and EUR-CHF by 0.5%. The former punched above its Jan-7 peak and into territory not seen since August 2010, logging a high at 1.0328, and the latter broke through range highs seen over the last month and clocked a six-month peak at 1.0926. There was no apparent news or data catalyst that might have sparked the move, and the SNB doesn’t appear to have been the culprit either. A short franc strategy does have merits, with Swiss deposit rates at -0.75% and Swiss government bonds yielding negative returns. This makes USD-CHF an attractive proposition to dollar bulls. Elsewhere, EUR-USD tumbled back below 1.0600, leaving a rebound high at 1.0631 and making a low of 1.0574, near Wednesday’s seven-month low at 1.0566. USD-JPY clocked a two-day low at 122.30 before recouping above 122.50, leaving Wednesday’s low at 122.26 untroubled. A slew of Japanese data were mixed and had little impact.
EUR-USD dove back under 1.06 today, leaving a low at 1.0574 so far but leaving Wednesdays seven-month nadir at 1.0566 untroubled . Further declines are likely. The slew of U.S. data this week, released before Thursday’s holiday, were firm, on net, and shouldn’t deter the Fed from hiking the Fed funds rate on Dec-16. The divergent policy paths between the ECB and the Fed also became evident, with ECB-speak having all but confirmed a deposit rate cut at next week’s meeting. EUR-USD’s April low is at 1.0520 provides a downside reference, and March’s major-trend low is at 1.0462. Resistance is at 1.0630-35.
USD-JPY clocked a two-day low at 122.30 before recouping above 122.50, leaving Wednesday’s low at 122.26 untroubled. The overall price action has been quite bearish, with momentum turning heavier and the pair breaching below its 20-day average this week, trading below it for the first time since late October. A deluge of data out of Japan today were mixed. Headline CPI 0.3% y/y in October, but the core figure was -0.1%, and household spending dove 2.4% last month, adding to a 0.4% decline in September. Japanese unemployment fell to a 20-year low of 3.1% in October, down from 3.4%, but this was down to a shrinking labour force. The data shouldn’t affect market expectations for the BoJ to expand monetary policy again at its policy meeting in January. USD-JPY resistance is at 122.58 (20-day moving average), support at 122.26 (Wednesday’s 12-day low).
Cable steadied after making a three-week low at 1.5031, though remains heavy with the rebound having faltered above 1.5050. The quid is also softer against the euro, though by a about half the magnitude in percentage terms. As expected second-estimate Q3 GDP data out of the UK didn’t have much impact, confirming the prelim readings of 0.5% q/q and 2.3% y/y. Cable’s decline breached Tuesday’s 1.5051 low, and a revisit of the Nov-6 low at 1.5027 looks likely. A batch of dovish BoE-speak midweek helped facilitate a downward bias in sterling, which has been an underperformer this week. BoE governor Carney said during parliamentary testimony on Wednesday that the low interest rate environment is likely to remain for some time, while his colleague Haldane said that inflation risks were “skewed materially to the downside.”
EUR-CHF suddenly bolted about 0.5% higher during the AM session in Europe, through range highs seen over the last month and clocked a six-month peak at 1.0926. The cross subsequently ebbed back to around the 1.0900 level. There is no apparent news or data catalyst that might have sparked the move, and the SNB doesn’t appear to have been the culprit either. A short franc strategy does have merits, with Swiss deposit rates at -0.75% and Swiss government bonds yielding negative returns. This makes USD-CHF an attractive proposition to dollar bulls, and the U.S. currency advanced by a greater degree than EUR-CHF did during the move today. The pair punched above its Jan-7 peak and into territory not seen since August 2010. The high so far is 1.0328, and, for reference, the August 2010 peak is 1.0403.
USD-CAD has recouped to the mid-1.33s after foraying below 1.3300 earlier in the week after correcting from Monday’s 1.3435 peak. The rebound in oil prices, which has taken front-month NYMEX crude futures up from the low $40s to the $42-$43 area, has underpinned the Canadian dollar. USD-CAD’s 12-year at 1.3457 remains just below the horizon. Key supports are at 1.3246-69, which encompasses the 20-day moving average and the Nov-19 low.