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By XE Market Analysis April 5, 2021 1:45 pm
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    XE Market Analysis: Asia - Apr 05, 2021

    The Dollar was under pressure through the N.Y. session on Monday, taking the DXY to 92.54, and eight-session low. Despite better outcomes for the non-manufacturing ISM, and a less sharp drop in factory orders, the USD remained heavy. A sharp rise in risk-taking levels following Friday's blowout jobs report likely weighed on the Buck. Wall Street rallied, taking the S&P 500 and the Dow to all-time highs intra day. U.S. futures were up Friday following the US jobs report, with the cash market closed for Good Friday. The full market added to those gains through the session on Monday. The Treasury market was mixed on the day, with the front end extending gains even after the record strength in the headline ISM services data. The short end rallied with yields a little richer, while rates at the long end were a bit cheaper.

    [EUR, USD]
    EUR-USD rallied to 1.1819 highs, up from 1.1738 lows seen ahead of the N.Y. open. The Dollar came under broad pressure this morning, which saw the DXY drop to one-week lows of 92.79. The risk-on backdrop, combined with thin trading conditions, due to the absence of London and other European markets, appeared to have been the drivers this morning. The March 25 top of 1.1828 is the next upside target.

    [USD, JPY]
    USD-JPY took a tumble to a one-week low of 109.96, down from opening highs of 110.53, and an overnight peak of 110.75. The Dollar came under broad pressure through the session, with thin markets and sharp risk-on conditions weighing on the USD and supporting the JPY. In addition, profit taking was likely a factor, after USD-JPY ran up to one-year highs of 110.97 last week. Going forward, further losses for the interest rate sensitive pairing will likely be limited, as rate differentials remain strongly in the Dollar's favor.

    [GBP, USD]
    Cable rallied to better than two-week highs, with the move coming on broad USD weakness on Monday. London was closed for the extended Easter holiday, leaving liquidity on the light side, which may have exacerbated today's Dollar moves. GBP-USD topped at 1.3914 in late morning N.Y. trade, up from overnight lows of 1.3813. The pairing look set to closed above its 50-day moving average, currently at 1.3951, for the first time since March 22, which will likely be taken as a bullish development.

    [USD, CHF]
    The SNB maintained its expansionary policy stance. The statement stressed that the pandemic "is continuing to have a strong adverse effect on the economy", adding that despite the "recent weakening, the Swiss franc remains highly valued" and against that background the policy rate was held at -0.75% and the bank stressed that "it remains willing to intervene in the foreign exchange market as necessary". The bank will also continue to supply the banking system with liquidity on "generous" terms. Nothing really new there, despite the fact that the SNB lifted its conditional inflation forecast on the back of higher oil prices and a weaker CHF. However, the new forecasts, which project average price increases of 0.2% this year, 0.4% for 2022 and 0.5% for 2023 are clearly nothing that would force the SNB to abandon the very expansionary policy. Looking forward the SNB's baseline scenario expects a gradual easing of virus restrictions in coming months and the forecast for overall growth this year remains at 2.5-3.0%. However, the SNB highlighted ongoing uncertainty, and warned that against the background of ongoing increases in mortgage lending and residential property prices this market remains vulnerable and "continues to present a risk for financial stability"

    [USD, CAD]
    USD-CAD fell to two-week lows of 1.2502, down from 1.2550 at the North American open, and from the overnight peak of 1.2595. The move lower came as the USD overall was under pressure, likely due to the risk-on backdrop. In addition, the CAD responded positively to the uptick in oil prices. WTI crude had fallen to $59.59 lows ahead of the open, later recovering over $60.60, partially due to the softer Greenback. Later, as oil prices again retreated under the $59.00 mark, USD-CAD bounced to highs over 1.2530. The March 22 USD-CAD low of 1.2474 is the next downside target.

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