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By XE Market Analysis August 5, 2020 3:09 pm
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    XE Market Analysis: Asia - Aug 05, 2020

    The DXY fell to within a whisker of the two-year bottom of 92.55 seen on Friday before recovering modestly in afternoon dealings. Risk-on conditions weighed on the greenback generally. Wall Street rallied as reports of a stimulus deal in the works by the end of the week circulated. Treasury yields were higher. For data, the headline July ADP private payroll print was a mile lower than forecasts, though hugely upwardly revised prior months took the sting out of the report. The June trade deficit narrowed nearly as much as expected, while the July services ISM improved more than consensus. EUR-USD opened near 1.1850, later peaking at 1.1906 before easing into 1.1860 on profit taking. USD-JPY opened at 105.88, bottomed at 105.32, subsequently bouncing to 105.65. USD-CAD eased to 1.3231, later rallying to 1.3290 as oil prices retreated. Cable bounced from pre-open lows of 1.3058, topping at 1.3162, then fading to under 1.3115.

    [EUR, USD]
    EUR-USD rallied from an early low of 1.1832, rallying to 1.1906 highs into the London close. The pairing failed to take out Friday's 25-month peak of 1.1910, which may have prompted some profit taking related selling. The Euro later eased back under 1.1860 lows. 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 hit a four-session low of 105.32, down from opening highs of 105.88. The Dollar was generally weaker on Wednesday, as risk-on conditions weighed, pressuring USD-JPY as well. Since Fitch downgraded the U.S. credit rating to AAA with a negative outlook last Friday, market talk over the deteriorating state of the U.S. fiscal position, and how it may, in the medium term exert further pressure on the Dollar. For now though, risk taking levels will continue to drive USD-JPY direction.

    [GBP, USD]
    Cable was floated once again by broad dollar weakness, rallying from 1.3058 lows in London, to a 1.3162 top in N.Y. The five-month peak at 1.3171 seen last Friday is within reach again. Recent dollar underperformance has been the largest factor supporting the Pound. The BoE's Monetary Policy Committee is reviewing policy on Thursady, 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 flat-lined in N.Y on Wednesday, ranging between 1.0782 an 107.63 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 to over seven-month lows of 1.3231, down from London highs of 1.3301. The move lower came as WTI crude rallied to five-month highs over $43.50, and as the USD remained broadly under pressure. Oil gains reversed sharply lower later in the session, seeing USD-CAD pop back to 1.3290. The pairing shrugged off the wider Canada June trade deficit. Oil prices, along with the direction of the Greenback will continue to influence the CAD going forward. USD-CAD support is now at the February 21 low of 1.3200, with resistance up at 1.3309, the overnight high.

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