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By XE Market Analysis August 11, 2017 3:19 pm
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    XE Market Analysis: Asia - Aug 11, 2017

    The dollar nose-dived after the cooler U.S. CPI data in N.Y. trade on Friday, sending yields lower in the process. Equity futures, which had been under water ahead of the numbers, bounced on a bad new is good news effect, and later, Wall Street posted modest gains. EUR-USD popped to one-week highs of 1.1835 from 1.1760, before easing to 1.1777. Into the weekend however, the greenback came under pressure again, leaving the euro at 1.1847. USD-JPY touched near four-month lows of 108.74, though finished the session near 109.00. USD-CAD eased to 1.2653, and largely stayed down as oil prices recovered. Cable did manage to reclaim the 1.3000 handle, but was limited to a 1.3031 high.

    [EUR, USD]
    EUR-USD rallied from 1.1760 to a one-week high of 1.1847 after the cooler U.S. CPI data, later falling back to 1.1778. The pairing has since steadied on either side of 1.1800 in light Friday afternoon trade. London accounts were reportedly sellers into the close, taking advantage of relatively lofty levels. We see the EUR-USD as having entered a choppy consolidation phase following a pronounced rally from early April through to early August. While the Eurozone economic picture has been continuing to improve, the ECB has made clear that it is no rush to taper, having signaled that it will review its position in the autumn.

    [USD, JPY]
    USD-JPY recovered smartly from its post-CPI sell-off, printing intra day highs of 109.40, after diving to near four-month lows of 108.73. The recovery in equity futures, and firming yields provided support, though with N. Korea looming just under the surface, further gains may be hard to come by for now. Indeed, the pairing later eased back under the 109.00 level in light afternoon trade.

    [GBP, USD]
    Cable failed to take out the 1.3000 level in London morning trade, printing 1.2999 before falling back to 1.2951 into the N.Y. open. The pairing rallied to 1.3009 after the soft U.S. CPI data, then later recovered to 1.3031 highs. Fundamental Brexit uncertainties remain, something which the BoE highlighted last week as curtailing business investment decisions, and sterling is likely to continue to be sold into rallies. Cable has long-term trend support at 1.2932--36, and resistance at 1.3106-08.

    [USD, CHF]
    EUR-CHF picked up back to around the 1.1350 level, after printing a two-week low at 1.1260 on Thursday. The flare-up in tensions between the U.S. and North Korea had sparked a mass of position trimming of franc shorts that had been recent established, with the Swiss currency itself showing it still retains some vestiges of being a safe haven, despite the SNB's best efforts to dismantle this in recent years. Assuming the Eurozone recovery remains on track, and should geopolitical tensions cool, we would continue to expect the franc to weaken.

    [USD, CAD]
    USD-CAD fell from 1.2715 to 1.2654 after the U.S. CPI report, later bouncing to pre-data levels. Oil price have largely sated near session lows, idling in the low $48s, which has provided USD-CAD support. The pairing did post one-month highs of 1.2753 in Asia, where sellers emerged. Sell-the-rally remains in effect, as traders look beyond oil prices, to the BoC, which remains on a policy tightening path.

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