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By XE Market Analysis August 12, 2020 2:51 pm
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    XE Market Analysis: Asia - Aug 12, 2020

    The Dollar was marginally lower overall in N.Y. on Wednesday, resulting in a DXY bottom of 93.29 from opening highs of 93.64. The USD has been suffering since the start of July, as pandemic concerns cloud the growth outlook, as the Fed remains in uber-easing mode, and more recently, growing fears that congress will not agree on a new stimulus bill. For data, July CPI came in hotter than expected, though ultimately did not provide any support to the Greenback. EUR-USD headed from 1.1757 lows to 1.1.1814 before steadying just under 1.1800, while USD-JPY fell from 107.01 to 106.67, though later recovering over 106.90. USD-CAD dropped from just under 1.3300 to near a six-month low of 1.3227. GBP-USD meanwhile, rallied from 1.3006 to 1.3059. Thursday's U.S. docket will feature weekly jobless claims and July trade price figures.

    [EUR, USD]
    EUR-USD bounced from eight-session lows of 1.1711 seen during Asian hours overnight, making its way to 1.1814 highs at mid-morning. The return of risk-on conditions through the session supported the pairing, as the Dollar was generally softer, despite the hotter U.S. CPI print. In addition, angst remains over the stalled stimulus package, which if passed should provide near term support for the USD. EUR-USD support is at 1.692, representing the 20-day moving average, with resistance at the August 7 high of 1.1884.

    [USD, JPY]
    USD-JPY posted a three-week high of 107.01 in N.Y. on Wednesday, hitting its peak just after the warmer U.S. CPI outcome. The pairing later faded to 106.68 lows, though bounced back toward the 107.00 mark into the London close as risk-on conditions prevailed. The 50-day moving average currently sits at 106.85, and a close above the level may provide a signal for follow through buying. Resistance comes in at the 107.30-107.50 region, which topped advances through the middle part of July.

    [GBP, USD]
    Cable fell to 1.3006 lows in early N.Y. trade, its weakest in over a week, as preliminary UK Q2 GDP data showing a gargantuan 20.4% q/q contraction to confirm the technical definition of recession following Q1's 2.2% drop. The data weren't a surprise, even being fractionally worse than the median forecast, given the lockdown that was in place to varying degrees throughout the quarter. June GDP rose by 8.7% m/m, however, with June production data showing a robust rebound and beating expectations in the main headline readings. GBP-USD later bounced to 1.3059 highs.

    [USD, CHF]
    The Swiss franc has steadied below recent highs, sticking to the mid 1.07s on Wednesday. The influence of the SNB's intervening hand seemed to have been at play. Weekly sight deposit figures out of Switzerland have been suggesting 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. A rise in sight deposits (money held by commercial banks) can suggest francs turning up after being sold by the central bank. The advent of the EU's recovery fund, seen as a milestone by many analysts (a new liquid AAA fund that also reduces Eurozone breakup risks) has by many accounts caused a re-weighting of the common currency in portfolios, and which will help the SNB combat what it sees as a chronically overvalued franc.

    [USD, CAD]
    USD-CAD fell to near six-month lows of 1.3227 in North American morning trade, down from overnight highs of 1.3348. The move lower came as oil prices remained near the top of their recent ranges, and as risk-on conditions prevail today, along with a generally softer USD. The next support level comes at the psych level of 1.3200, which was also the low on February 21. The Canadian Dollar should continue to remain sensitive to fluctuations in the U.S. Dollar and oil prices.

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