Currencies are likely to remain range bound as market participants will be non-committal into the holiday period. The yen, while steady today, has been finishing the year on a softening tack. ‘Abenomic’ policies remain in full swing, with the cabinet today approving a stimulus budget, and with the BoJ having signalled yesterday that it is in no rush to exit from crisis-mode monetary stimulus. USDJPY has settled around the 113.25-25 mark after yesterday clocking a 10-day high of 110.63. EURJPY is trading 26-month high territory, and AUDJPY in seven-week high terrain. Elsewhere, EURUSD dipped to a two-day low of 1.1817 in the early Asia session today before lifting to around 1.1850. The euro has been the year’s star performer out of the main currencies, registering a 12.8% year-to-date gain versus the dollar, which is the weakest. The abatement of existential political threats along with gathering economic growth momentum have underpinned the common currency this year. Sterling has traded mixed this year, gaining on the dollar while losing ground to the euro, but we expect it will maintain the 15% trade-weighted discount that’s been roughly persisting since the Brexit vote in June 2016 into 2018.
Today the EURUSD support is around the 1.1833-25 zone (lower Bollinger band, S2 from the Daily Chart and H1 200 EMA). Resistance is initially found at 1.1858 (Bollinger band mid line), 1.1873 (Daily Pivot and H4 down channel) and then at 1.1892. (R1 from the Daily time frame).
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Senior Market Analyst
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