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By XE Market Analysis August 14, 2019 2:54 pm
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    XE Market Analysis: Asia - Aug 14, 2019

    The Dollar was mostly firmer in N.Y. on Wednesday, with severe risk off conditions helping the USD and JPY. Wall Street melted down as the 2-10 year Treasury curve inverted for the first time since 2006, indicating heightened risk for a recession at some point in 2020. In addition, the 30-year bond yields fell to its lowest level ever, printing 2.018%. Fir data, import prices were a bit lower than expected, though had little impact on the FX market. Safe-haven flows via EUR-USD saw that pairing fall to eight session-lows of 1.1136, down from early highs of 1.1190. USD-JPY managed to hold above Tuesday's seven-month bottom of 105.05, though traded to 105.65 lows after opening near 106.10. USD-CAD traded to one-week highs at 1.3325, up from near 1.3250 into the open. Cable stumbled into 1.2150 lows, coming from 1.3200.

    [EUR, USD]
    EUR-USD printed eight-session lows of 1.1136 after the London close, down from 1.1190 highs seen early in the session. A negative GDP print for Germany weighed on the Euro to an extent, upping the ante for ECB easing moves, though the meltdown in risk taking levels appears to have prompted some safe-haven Dollar buying. Treasuries have roared higher today, with talk of solid European buying noted, apparently weighing on EUR-USD. Next support is at 1.1100, then the 27-month low of 1.1027 seen on August 1.

    [USD, JPY]
    USD-JPY bottomed at 105.78 into the N.Y. open, managed a bounce to 106.11 after the open, then fell back to 105.65, down over 100 points from Tuesday's high. The move lower came on yet another dive in risk-taking levels, driven by the early inversion of the U.S. 2-10 yield curve, a fairly reliable predictor of a coming recession. Yields and Wall Street remained sharply lower, also weighing on USD-JPY. Support comes at Monday's seven-month low of 105.05.

    [GBP, USD]
    Cable headed lower after the UK yield curve inverted, in sympathy with the inversion seen on the U.S. curve. The Gilt 2/10-year yield differential went negative for the first time since the global financial crisis of 2008. This follows preliminary UK Q2 GDP data, released last Friday, unexpectedly showing a negative reading, of -0.2%, and comes with markets bracing for the risk of a disorderly no-deal Brexit. The Pound reversed intra day gains that were seen after warmer than expected CPI data and on news that the speaker of the House of Commons, John Bercow, stated that he will fight to stop PM Boris Johnson from shutting. Cable to lows of 1.2052 after printing an intra day high at 1.2100.

    [USD, CHF]
    EUR-CHF slid to 108.38 in N.Y. on Wednesday, as the CHF again showed its safe-haven bona fides in light of a meltdown in risk appetite. Today marked the lowest seen since mid-June of 2017. From here, upside price action may be limited, as the ECB is on course for additional monetary stimulus in September, and the likelihood for further risk aversion in global markets remains high.

    [USD, CAD]
    USD-CAD traded above its 200-day moving average of 1.3302, peaking at one-week highs of 1.3325. The fall in the price of WTI crude to under $54 from near $57.50 seen on Tuesday, along with broad risk-off conditions drove the pairing higher through the morning session. Resistance now comes at 1.3345, the August 7 top. Support remains at 1.3185-80, where the 20- and 50-day moving averages converge.

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