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By XE Market Analysis April 29, 2021 1:16 pm
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    XE Market Analysis: Asia - Apr 29, 2021

    The DXY printed two-month lows of 90.42 overnight, though perked up to 90.78 highs at mid-morning in N.Y.. A better than consensus Q2 U.S. GDP print helped Dollar sentiment, while Jobless claims were about in-line with expectations. Wall Street was mostly higher, though A Reuters' report that Labor Secretary Walsh says most gig workers should be classified as employees weighed no the NASDAQ as it hit the likes of Uber, Lyft, and DoorDash. Treasury yields maintained gains through the session, also supportive of the USD. Friday's U.S. calendar includes March personal income and consumption, with the former expected to rise 21.2% from -7.1%, and the latter up 3,8% from -1.0%. Two rounds of fiscal stimulus and the distribution of vaccines during Q1 should provide a sharp lift to income and consumption. Q1 ECI is seen rising 0.6% from 0.7% q/q and 2.3% versus 2.5% y/y. The April Chicago PMI likely dipped to a still lofty 65.0 from 66.3, while the final April University of Michigan consumer sentiment index is forecast at 87.0 from the preliminary 86.5.

    [EUR, USD]
    EUR-USD printed two-month highs of 1.2150 during Asian hours before running out of steam. The Dollar had come under some pressure following the FOMC announcement and press briefing on Wednesday, as Chair Powell said in no uncertain terms that "it is not time yet" to start talking about tapering asset purchases. There was little EUR reaction to the warmer Germany CPI data, though rumored profit taking from real-money players, perhaps driven by higher U.S. yields in the aftermath of the stronger U.S. GDP report, later saw EUR-USD ease back to 1.2102 lows. U.S. inflation concerns remain, and eventually U.S. yields will need to rise. This is when the EUR-USD rally seen through April will likely come to an end.

    [USD, JPY]
    USD-JPY headed to 13-session highs of 109.24, up from 108.84 into the open, and overnight lows of 108.44, which came on the back of the Fed saying QE tapering is not coming anytime soon. The pairing since recovered on the back of a fairly decent risk-backdrop, while the BoJ's trimming of inflation forecasts following its policy meeting earlier in the week, should continue to keep pressure on the Yen. In Japan, the third state of emergency to contain Covid cases, just months away from hosting the Olympics has weighed on the JPY as well. The April 13 high of 109.75 marks the next resistance level.

    [GBP, USD]
    Cable rallied overnight, as the Dollar overall came under pressure following the FOMC's throwing cold water on QE tapering. The pairing moved to eight-session highs of 1.3977, and ranged between 1.3966 and 1.3937 through the N.Y. session, with the USD perking up modestly, as 10-year Treasury yields moved higher, as U.K. rates were slightly underwater. GBP-USD support comes at the 50-day moving aveerage, which currently sits at 1.3876, with resistance at the April 20 peak of 1.4009.

    [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. EUR-CHF had held above the key 110.00 level for over a month, before dipping under the level from April 9 to 13, printing a better than one-month low of 1.0975 before reclaiming the 1.10 handle again, and touching a three-week high of 1.1071 on Monday.

    [USD, CAD]
    USD-CAD hit fresh three-plus year lows of 1.2281 into the North American open, down from London highs of 1.2315, and Wednesday's peak of 1.2418. The pairing continues to be driven lower by a generally soft USD, a seven-week high in WTI crude, and ongoing fallout from the BoC's surprise QE taper seen last week. On the Covid front, Canada appears to be turning the corner, with cases on the decline over the past week, and the rate of vaccinations on the rise. This is likely a CAD positive, at the margins at least. The next support level comes at the January, 2018 low of 1.2248.

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