USD Market report 09.12.2014

The dollar remained on a generally softer footing following a period of outperformance. EUR-USD was supported by profit taking and the triggering of stops though 1.2345-50, making a two-day high at 1.2367. Higher than expected German trade surplus gave a fundamental underpinning. USD-JPY extended its correction from yesterday's seven-year high at 121.85, retreating below 120.00 to a low of 119.53 before finding a toehold. A bout of risk aversion in broader financial markets underpinned the yen, in lime with the currency's usual inverse correlation with stock markets, and there were reports of sizable position squaring in AUD-JPY during the Asia session. AUD-USD fell to a fresh major trend low for a fifth straight day during the Sydney session, though subsequently rebounded from the 0.8224 low to near net unchanged levels around 0.8295. Sterling took a knock on disappointing production data out of the U.K. Cable dipped to a low of 1.5632, though downside progress was limited amid broader dollar losses. EUR, USD

EUR-USD is firmer today after logging a 28-month low at 1.2247 yesterday. Profit taking and triggering of stops around 1.2345-50 fuelled a rebound to 1.2367 so far. Higher than expected German trade surplus gave a fundamental underpinning. We remain bearish in the bigger picture, however, looking for an eventual make move on the July 2012 low at 1.2042 on the driver of diverging Eurozone and U.S. economic growth. Resistance is marked at 1.2393-1.2400. USD, JPY

USD-JPY has extended its correction from yesterday's seven-year high at 121.85, retreating below 120.00 to a low so far of 119.53. Support levels are marked at 119.34-35 and 119.00. The move largely reflected yen outperformance, blamed on a bout of risk aversion in broader financial markets, and there were reports of sizable position squaring in AUD-JPY. Stock markets in Asia were down for a second consecutive day. We expect yen selling will re-emerge before long amid expectations that PM Abe will landslide this week's election, which would give yen-negative "Abenomics" policies a fresh mandate. GBP, USD

Sterling took a knock on disappointing production data out of the U.K. Industrial production unexpectedly declined by 0.1% m/m in October, while the y/y measure grew 1.1%, well off the Trading Economics median for 1.8% y/y. There were also hefty downward revisions in September, and the narrower manufacturing output figure was similarly disappointing. Cable dipped to a low of 1.5632, though downside progress was limited amid broader dollar losses. We continue to class Cable as being in a bear trend, which has been persisting since the July cycle high at 1.7192, having made new trend lows on Friday and again yesterday. Resistance is at 1.5694-1.5700. The 1.5541 trend low marks support ahead of 1.5500, while the August 2013 low at 1.5102 should be in the crosshairs of bears. USD, CHF

EUR-CHF has continued to ply a narrow range above 1.2020, giving the SNB a little space between spot levels and its rumoured buffer zone between 1.2010 and the 1.2000 franc cap. SNB's Zurbruegg recently pledged that the 1.2000 franc cap will be defended "with utmost determination" as the bank is prepared to buy an unlimited amount of FX and take further measures immediately if needed. According to more than 60% of respondents of a Bloomberg survey, the SNB will have to use negative interest rates to prevent the 1.2000 franc cap in EUR-CHF from being breached in the scenario that the ECB commences quantitative easing, while all but one are anticipating the SNB to step up interventions to defend the 1.2000 cap. Bloomberg also cited SNB member Zurbruegg clarifying that negative rates would have a bigger impact in Switzerland than has been the case in the Eurozone as permanent excess liquidity in the Swiss financial system exceeds 300 billion francs. USD, CAD

USD-CAD has settled in the upper 1.14s, just off the major-trend high at 1.1476, seen on Friday in the wake of the solid U.S. jobs report. We continue to anticipate a move on 1.1500, and above, with the CAD likely to trend lower on the back of soft oil prices. Support is marked at 1.1400-05.

#usd #usdreport #usdreport