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By XE Market Analysis August 3, 2020 3:04 pm
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    XE Market Analysis: Asia - Aug 03, 2020

    The Dollar added to overnight gains early in N.Y. on Monday, though later faded following mixed U.S. data, which saw the July manufacturing ISM print slightly better, along with disappointing June construction spending figures. The DXY rallied from 93.38 lows overnight to a N.Y. high of 93.99, later fading under 93.60. Wall Street advanced as stronger than expected final PMIs out of the Eurozone, China, Japan and the U.S. the catalysts. The NASDAQ printed fresh record highs on an intra day basis. Treasuries remained weak. EUR-USD bottomed at 1.1696, later printing a high of 1.1758,. USD-JPY rallied from pre-open lows near 106.00, subsequently topping at 106.47 before fading into 106.05. USD-CAD peaked at 1.3451, up from London lows of 1.3399, but eased back under 1.3400 as oil prices were bid up in afternoon trade. Cable eased to 1.3005 in early trade, before bouncing to 1.3070.

    [EUR, USD]
    EUR-USD printed a one-week low in N.Y. trade, falling to 1.1696 early in the session after coming from 1.1796 in early Asia. Stronger European PMIs gave the Euro a bit of a boost during the London session, though the brief rally was quickly sold into. The DXY hit two-year lows on Friday, and we suspect today's USD bounce was driven by a fairly sharp round of short covering. The pairing later recovered to 1.1758 highs. Bigger picture, further EUR-USD gains are seen going forward, as economic uncertainty related to COVID should continue to weigh on the USD, as cases continue to climb, while the EU pandemic recovery fund should keep the EUR supported. In the near term, markets will be watching Washington to see how the next stimulus plays out. The lack of a deal will weigh on the Greenback.

    [USD, JPY]
    USD-JPY opened near 106.10, up from overnight lows of 105.58. The pairing later topped at 106.47 ahead of the data, then fell back to 106.07 lows, seemingly on a combination of the weaker construction spending report and sellers stepping in ahead of the 20-day moving average at 106.54. Nonetheless, the drop was modest. USD-JPY spent the remainder of the session rangebound between 106.05 and 106.20. Monday's risk on session limited downside, while the USD overall was relatively buoyant. From here, resistance is at the 20-day moving average at 106.55, with support at the overnight low at 105.58.

    [GBP, USD]
    Cable fell from 1.3113 highs seen in London, falling under 1.3115 into the N.Y open, eventually touching 1.3005 in early N.Y., before bouncing to 1.3070. Helping the pound last week were signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. The BoE reviews policy this week (announcing on Thursday), where a no change is widely anticipated, alongside what will no doubt be a reassuringly strong commitment to maintain ultra-accommodative policy.

    [USD, CHF]
    EUR-CHF matched last week's near two-month high of 1.0841 in N.Y. on Monday. The cross continues to be supported however, by broad outperformance of the Euro and, possibly, the added influence of the SNB's intervening hand. Weekly sight deposit figures out of Switzerland suggest that the central bank has been continuing to sell francs regularly, as it has been since the consequences of the pandemic took a grip on markets, which had the impact of increasing demand for the Swiss currency, back in March. Recent general Euro strength has provided the cross support. The pairing continues to trade comfortably above the series of lows near 1.0500 that were seen from March through to mid May. Committed SNB intervention prevented the 1.0500 level from being breached over this period.

    [USD, CAD]
    USD-CAD headed up to two-session highs of 1.3451 in early North America, up from Asian lows of 1.3388. The move higher came despite relatively firm oil prices and a risk-on backdrop, generally a CAD-positive. Today though, with the USD's early resurgence generally, USD-CAD was dragged higher. Later, gains faded as WTI crude advanced over 2% over $41.00, resulting in a 1.3380 low. Resistance is now at last Thursday's 1.3461 high, with support see at Friday's 1.3369 low.

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