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By XE Market Analysis April 28, 2020 2:46 pm
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    XE Market Analysis: Asia - Apr 28, 2020

    The DXY recovered from the two-week lows of 99.45 seen into the Tuesday N.Y. open, rallying back to 99.94 through the morning session. Today's economic reports were mixed, with the current April consumer confidence and Richmond Fed headline indexes dropping sharply, but each showed gains for the 6-month figures. Wall Street was mixed, with the NASDAQ underperforming, as tech stocks were hit. Treasury yields were lower. EUR-USD dipped from 1.0888 to 1.0825 lows, while USD-JPY rallied t 106.97 from 106.57. USD-CAD fell ahead of the open as oil prices rallied,, bottoming at 1.3936, later rebounding to just over 1.4000. GBP-USD headed from early highs over 1.2510 to a 1.2421. The FOMC policy announcement is due at 14:00 EDT on Wednesday. We think further rate cuts into negative territory are off the table, given both internal and public opposition for now, leaving little room for any policy changes at the meeting. The market will focus closely on the statement and ensuing press conference for signals regarding future policy options, including further portfolio expansion or forward guidance.

    [EUR, USD]
    EUR-USD rallied to seven-session highs of 1.0888 at the N.Y. open, before spending the remainder of the morning slipping to 1.0825 lows. The pairing has maintained about a 1.0750 to 1.0900 trading range for nearly two-weeks now, with directional changes coming based on the risk backdrop of the day. More of the same appears to be in the cards for now. The FOMC announcement on Wednesday and the ECB's on Thursday will not likely impact EUR-USD much, as both banks are in full bore ease mode, and will likely remain that way for some time.

    [USD, JPY]
    USD-JPY hit better than one-month lows of 106.56 into the N.Y. open, after trading a narrow band over 107.20 overnight. The decisive break below the 107.00 level (Monday's low was 106.99) brought sell-stops to bear, which saw follow-through selling to the lows of the session. Since then, with risk taking levels more or less neutral on the day, USD-JPY has made its way to 106.97 highs.

    [GBP, USD]
    Cable topped at 1.2518 at the N.Y. open, later pulling back to 1.2421 after the London close. The dynamic largely mirrored a fall and then partial rebound in the dollar. With the global rate of coronavirus infection in decline, and major economies starting a phased reopening, the tide looks to be shifting, though this assumes that the reopening can be done without causing a second wave of infections. This backdrop should help support the pound, though the continued risk for the UK leaving the post-Brexit transition membership of the EU's single market at the end of the year should curtail upside potential.

    [USD, CHF]
    EUR-CHF traded briefly through its 50-day moving average, on its way to April highs of 1.0611 on Tuesday, later pulling back into 1.0550 as risk taking levels faded. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

    [USD, CAD]
    USD-CAD fell to 1.3936 lows, levels last seen on April 15, coming from overnight highs of 1.4073. The sharp rise in oil prices were the major driver, seeing WTI crude rally to $13.68 from lows of $10.09. Since then, WTI has slipped back under the $12.00 mark, allowing USD-CAD to recover to 1.4000 highs. Troubling for the CAD going forward are Western Canadian Select oil prices, which reportedly remain on the $6/bbl handle, and will limit USD-CAD downside potential for the time being.

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