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By XE Market Analysis August 4, 2020 3:06 pm
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    XE Market Analysis: Asia - Aug 04, 2020

    The Dollar attempted to rally early in the session on Tuesday, though it quickly turned lower through the remainder of the session. The DXY fell from early highs of 93.83, later bottoming at 93.34 in afternoon dealings. U.S. fiscal concerns appeared to be the driver of USD weakness. Chatter on the fiscal outlook stepped up last Friday as Fitch affirmed the U.S. AAA rating, though downgraded the outlook to negative. Incoming data today revealed a better June factory orders outcome, though there was little reaction. Wall Street was narrowly mixed through the session, while Treasury yields were lower. EUR-USD rallied from 1.1721 to 1.1791, as USD-JPY fell from 106.19 to 105.71. USD-CAD dropped from 1.3421 to 1.3345. GBP-USD meanwhile, opened at lows of 1.2981, making its way to 1.3071 highs after the London close. Wednesday's economic docket has the July ADP employment survey and the June trade report.

    [EUR, USD]
    EUR-USD turned higher at mid-morning rallying from lows of 1.1721 to 1.1791 after the London close. The Dollar has come under broad pressure through much of the session, after attempting to move higher in early trade. Hopes for a stimulus package in the U.S. have been dashed to a degree, being a weight on the USD, though at some point a package will likely be worked out, and another likely $2.5 tln of debt issued. At some point, the massive U.S. debt and deficits will put longer term pressure on the USD. For now, EUR-USD remains in buy-the-dip mode, with a near term upside target at 1.2000.

    [USD, JPY]
    USD-JPY peaked at 106.19 in early trade, and after ignoring the better factory orders data, slid to low of 105.71. The Dollar was broadly lower today, and could be reacting to uncertainty over the U.S. fiscal situation overall, along with signs of economic slowing. For USD-JPY specifically, today's dive in Treasury yields, in some cases to record lows, has likely been a catalyst for losses today. The Yen by and large remains sensitive to yields and risk levels. Wall Street is barely hanging on to gains, which could be putting some pressure on the pairing as well.

    [GBP, USD]
    Cable tested the waters back under 1.3000, printing a low at 1.2981. General USD weakness saw the pairing subsequently rally to 1.374 highs after the London close. Market talk of further USD losses has been making the rounds recently, as investors begin to take a closer look at the U.S. fiscal position, which has deteriorated fairly sharply over the past few month as debt levels increase by many trillion of Dollars over the past few months.

    [USD, CHF]
    EUR-CHF faltered on Tuesday, bottoming at 1.07738, after matching 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 from London lows of 1.3358 before climbing to early North American highs of 1.3421. This morning's fall in WTI crude to just over the key $40 mark supported the pairing, as have moderately risk-off conditions, and a generally firmer USD. From there, as the USD headed broadly lower, and as oil prices rallied from near $40 to $42, USD-CAD slid to 1.3345. Oil prices, along with the direction of the Greenback will continue to influence the CAD going forward. USD-CAD support is now at Thursday's low of 1.3332, with resistance up at 1.3452, Monday's high. Canada's June trade report is due Wednesday.

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