Focus Shifts Back to Cliff

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The Swiss National Bank left its rates unchanged this morning and pledged to defend the currency level of 1.2000 francs per EUR, “with utmost determination.  Rates were kept at zero percent.  With all the problems in the Eurozone the Swiss Franc has become somewhat of a European safe haven and the strength of the currency is weighing on Swiss exports.

In Japan, the JPY continues to weaken ahead of this weekend’s election.  Opposition leader Shinzo Abe is expected to be elected and his policies for added liquidity have weakened the JPY over the last few weeks.  His intentions are pretty clear.

He believes that weakening the JPY will aid the stock market and improve the economy.  The BOJ meets next week after the election and analysts expect the central bank to add monetary stimulus.

The commodity currencies, AUD and CAD are benefitting by the continuing stimulus of the FED and anticipated stimulus of the BOJ.  AUD has tested the 1.0560 resistance level, while the USD/CAD tested support this morning at .9830.  A break of this level would see a target of .9780.

The EUR teased traders yesterday, trying to break the 1.3100 level but good selling interest above that level pushed the single currency back into the mid 1.30’s.  Sentiment still seems to be pro EUR and a move below the 1.3020 area would be needed to change those feelings.

With all the hoopla of the FOMC meeting out of the way, attention returns to the fiscal cliff negotiations in Washington.  There has been no real movement and the clock continues to tick,  While congress is expected to end its session next week, leaders admit they will stay longer if necessary.  While most look at Dec. 31 as the deadline, the real one could be closer to Christmas Day, as it takes a few days to write the legislature and then vote on it.  I still believe we will see an agreement by the middle of next week.  I can’t believe that congressmen want to spend Christmas in DC.

All eyes will remain on the “cliff talks” today and tomorrow.

Look for the EUR to remain in a 1.3020 -1.3090 trading range.

Further reading: 4 Reasons Why Fed Decision is Extremely Dovish – High Pressure on Dollar

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About Author

Matthew Lifson is a Foreign Exchange Trader and a Market Analyst. with Cambridge Mercantile Group.