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By XE Market Analysis August 8, 2018 2:22 pm
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    XE Market Analysis: Asia - Aug 08, 2018

    The Dollar index perked up early in the N.Y. session on Wednesday, though later gave back its gains, dropping to 95.13 from 95.40 highs. There was no U.S. data to move markets. Wall Street settled on either side of flat, while Treasury yields were a touch lower. EUR-USD ranged between 1.1573 and 1.1609, as USD-JPY was stuck in a narrow band near 111.00 ahead of option expiries on Thursday. USD-CAD rallied to 1.3117 on the Canada/Saudi diplomatic spat, though fell back to 1.3010 as progress on NAFTA was reported. Cable remained a basket case, bottoming at one-year lows of 1.2854 as Brexit fears ramped up.

    [EUR, USD]
    EUR-USD has been range bound through the session, opening at lows of 1.1573, before topping at 1.1609 ahead of the London close. The pairing again has had difficulty holding the 1.16 handle, and after a brief foray over the level, has pulled back to 1.1591 lows. A sell-the-rally mentality will likely prevail, at least until the one-week high of 1.1669 is breached.

    [USD, JPY]
    USD-JPY has been glued to either side of the 111.00 mark through the morning session, as a report of a large 111.00 strike option expiry tomorrow makes the rounds. The pairing has been confined to a 111.18 to 110.94 range since the N.Y. open. More of the same may be in the cards until the 10:00 EDT N.Y. option cut on Thursday.

    [GBP, USD]
    The Pound remained heavy after falling sharply. Cable clawed back to 1.2897, though showed little sign of making a rebound of any duration after earlier posting a one-year low of 1.2853. Sterling was also down against the Euro and Yen, and has now racked up an average 4.1% decline on the year-to-date against the Dollar, Euro and Yen. In trade weighted terms the pound is now trading just over 15% below levels that were prevailing ahead of the vote to leave the EU in June 2016. The losses today reflect a growing concern that the British government, which is fragile and divided over the Cabinet's Brexit plan, will be capable of hammering out a new agreement for a future relationship with the EU, which for its part has collectively indicated that it will reject much of the UK's proposals as they stand.

    [USD, CHF]
    EUR-CHF has rebounded above 1.1550 after printing a six-week low of 1.1498 on Monday, which extended a decline that was started by the dovish-tilting policy guidance of ECB President Draghi in July. The low is the nadir of a retreat from the two-month high that was posted in mid July at 1.1714. This cross still remains in a broadly sideways range that's been evolving since late May, which is a similar pattern that EUR-USD has been seeing.

    [USD, CAD]
    USD-CAD rallied to seven-session highs of 1.3117 in early North American trade. Rising tensions between Canada and Saudi Arabia appear to be behind Loonie weakness. The Kingdom has recalled 15,000 Saudi students from Canadian schools, and is in the process of transferring Saudi patients in Canadian hospitals to facilities outside of Canada. In addition, Saudi Airlines has canceled all flights to Toronto. The diplomatic skirmishes began following a tweet from Canada's foreign ministry last week, condemning the arrest of Saudi human rights activists. Later, USD-CAD fell to 1.3026 from near 1.3080 following Bloomberg headlines saying the U.S. and Mexico could have a NAFTA auto deal by the end of the week, and that Canada will join negotiations in Washington as early as next week.

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