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By XE Market Analysis August 5, 2019 2:41 pm
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    XE Market Analysis: Asia - Aug 05, 2019

    The Dollar lost ground in N.Y. trade on Monday, the move driven largely by ramped up expectations for a September Fed rate cut, following the escalation of the U.S./China trade war. China's devaluation of the yuan, along with its cessation of purchasing U.S. agriculture products. Wall Street plunged, as did Treasury yields, which weighed further on the Greenback. The DXY dropped from 97.70 at the open, to a low of 97.42. EUR-USD topped out at 1.1213, up from 1.1170 at the open, and from intra day lows of 1.1114 in London morning trade. USD-JPY touched 105.90 lows, just above the overnight seven-month bottom of 105.79 in Asia. USD-CAD was choppy with Canada on holiday, with the pairing largely trading in response to oil prices. Cable meanwhile, lost some ground from opening levels, settling near 1.2150.

    [EUR, USD]
    EUR-USD printed two-week highs of 1.1213, up from lows of 1.1170 in early N.Y. trade. The latest trade was escalations between the U.S. and China, have ramped up Fed easing speculation, with a September 25 bp rate cut fully priced into the market. This has given the Dollar a hard time of late, resulting in the DXY dropping from over two-year highs last week, to two-week lows on Monday. The Euro is over its 20-day moving average at 1.1185 for the first time in nearly a month, and now has sights set on the 5-day moving average at 1.1235.

    [USD, JPY]
    USD-JPY has remained above its seven-month low of 105.85 seen overnight, but is back under the 106.00 mark, after briefly bouncing to 106.23 after the N.Y. open. The combination of seriously risk-off conditions, including melting equity markets and sharply lower yields, along with the ratcheting up of trade fears following China's currency devaluation, and halt in buying U.S. agricultural products, have put significant pressure on USD-JPY. The next downside target will be the January 3 "flash crash" low of 104.66.

    [GBP, USD]
    Cable ended the N.Y. session just under opening levels at 1.2160. The UK currency had earlier rallied, in part at the short-squeezing prompt of an above-forecast reading in the UK's July services PMI. We see little scope for a sustained rebound in the Pound however, as the no-deal Brexit risk remains real with the October 31 deadline rapildly approaching.

    [USD, CHF]
    EUR-CHF has taken as sharp dive over the last few sessions, extending to a 25-month low at 1.0863 on Monday. The latest mover was China's yuan devaluation and ramped up trade tensions, result in safe-haven flows into the CHF. The ECB's course to additional monetary stimulus in September, and risk aversion in global markets following Trump's escalation in his trade way with China last week, along with today's developments, have been weighing on the cross. The risk of a disorderly no-deal Brexit on October 31 is also in the mix, which is a bearish factor for the cross.

    [USD, CAD]
    USD-CAD pulled back from London morning highs of 1.3247, falling to 1.3212 (its 50-day moving average) in early North American trade. Canada was out for a civic holiday today, so a lack of liquidity resulted in an uptick in volatility through the morning. Oil prices remained a driver of USD-CAD direction, and an uptick in WTI crude took USD-CAD to four-session lows of 1.3178 at mid-morning. Given the rising trade tensions between the U.S. and China, concerns over slowing global growth could keep crude prices under pressure, resulting in a higher USD-CAD.

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