Dollar Correction Continues

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Market Drivers November 22, 2016
Japanese earthquake causes little damage
Dollar correction continues
Nikkei 0.31% Dax 0.34%
Oil $49/bbl
Gold $1218/oz.

Europe and Asia:
GBP UK PSNV 4.3B vs. 5.9B

North America:
CAD Retail Sales 8:30
USD Existing Home Sales 10:00

The currency markets were rattled early in Asia session trade when an offshore 7.4 earthquake rocked Japan triggering fears of a tsunami that could cause damage to country’s nuclear power plants. USDJPY dropped by more than 50 pips in a matter of minutes but as news of damage turned out to be minimal the pair regained lost ground.

Still after making another foray into the 111.00 level the pair once again came under some selling pressure as profit taking continues to weigh on the dollar. With little data on the docket expect Existing Home Sales, the quiet consolidation that has marked this week so far is likely to continue, but if US yields see any decline today chances are the pair will test support at 110.00 as the day proceeds.

Elsewhere, the only currency that was markedly weaker against the greenback was the pound which dove to a low of 1.2425 in morning London dealing before finding a modicum of support. It was difficult to pin down the reason for the weakness as the eco data was actually better than expected with PSNB coming in at 4.3B versus 5.9B. There were some comments from one of the EU negotiators stating that the window for Brexit was about 14-15 months putting some pressure on the British, which may have caused some selling. In addition, the government of PM May may have gotten into a slight diplomatic scuffle with President-elect Trump who tweeted out that Nigel Farage would make a good choice for ambassador to US. The UK government instantly replied that the post of ambassadorship was not open for vacancy.

To the extent that the Trump victory provided some political support to UK, providing promise of bi-lateral trade agreements with US should the country leave the EU, today’s little diplomatic tiff may have caused some concern amongst investors about the “special” relationship that the two countries enjoy. In any case cable remains decidedly weak today and may come in for another about of selling as the day progresses with 1.2400 now squarely in the view of the shorts.

Boris Schlossberg
Managing Director

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