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By XE Market Analysis August 7, 2020 3:13 pm
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    XE Market Analysis: Asia - Aug 07, 2020

    The U.S. jobs report defied the market's downside fears with solid July job gains, and allowed the Dollar to rally into the weekend. While the NFP outcome was a bit light of consensus forecasts, it was good enough for markets to breath a sigh of relief. The DXY rallied from early 93.01 lows, later touching a high of 93.62. EUR-USD fell from an opening high of 1.1846 to a 1.1755 low, as USD-JPY headed from 105.60 low to a peak of 106.06. USD-CAD bottomed at 1.3323, later rallying to 1.3399 highs. GBP-USD moved from 1.3110 to 1.3010.

    [EUR, USD]
    EUR-USD dropped to four-session lows of 1.1755, down from early highs of 1.1846 in the aftermath of the decent U.S. jobs report. Uncertainty over the U.S. stimulus package likely limited USD gains on Friday, the passage of which will provide near term support to the Dollar. Bigger picture, the Dollar overall has remained under pressure, as Treasury yields sit near record lows, and as the near term U.S. economic outlook remains cloudy due to the virus. In the medium term, massive U.S. deficits will weigh down the USD as well. A buy-the-dip strategy has been working well for EUR-USD, and should continue to be the way to go for now. Near term upside target is at 1.2000.

    [USD, JPY]
    USD-JPY caught a modest bid after the U.S. jobs report, taking the pairing from lows of 105.56 to a four-session high of 106.06. It has remained sideways over 106.80 since. The employment report allayed the market's downside job fears, allowing the Dollar to rally broadly through the N.Y. session. Pre-weekend short covering was a driver as well. USD-JPY resistance is now the 2-day moving average at 106.23, with support coming in at Thursday's 105/29 low.

    [GBP, USD]
    Cable posted a four-session low of 1.3010 after the U.S. jobs report, down from early highs of 1.3110. low at 1.3086, pulling back from the 1.3187 five-month peak seen Thursday following the BoE's deliverance of a modestly-upbeat outlook. The USD rallied broadly after the data. Following a phase of outperformance, we are taking a circumspect view of the pound's upside potential. Both Manchester and Aberdeen are back in lockdown. The new lockdowns, and ongoing "feardemic" as winter approaches, have potential to erode economic recovery metrics. Brexit also remains unresolved, although off the agenda for now during the summer break. Talks are scheduled to resume on the week of August 17th.

    [USD, CHF]
    EUR-CHF fell from 1.0814 highs to 1.0754 lows after the U.S. jobs report on Friday. The data saw the USD rally broadly, and took EUR-USD about 100 points lower, which supported the CHF. 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 fell back to 1.3323 lows from near 1.3355 following the U.S. and Canada jobs report, both which showed improvement, though not as strong as expected. The pairing had printed four-session highs of 1.3372 in Asian trade. The modest move lower this morning likely came as oil prices rose following the employment reports, taking WTI crude to $42.15 from near $41.40. Later, as crude prices faded, and as broad USD buying picked up, USD-CAD rallied back to 1.3399 highs.

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