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By XE Market Analysis August 14, 2020 3:24 pm
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    XE Market Analysis: Asia - Aug 14, 2020

    The Dollar lost modest ground in N.Y. trade on Friday. though trading ranges were narrow overall. Incoming data was largely strong, though traders generally overlooked the better than expected retail sales data, and a decent production report that helped confirm the Q3 recovery scenario. Wall Street traded on either side of flat to end the week, while Treasury yields were narrowly mixed as well. EUR-USD opened at lows of 1.1807, spending the morning rallying to a 1.1851 top. USD-JPY started at near 106.70, later bottoming at 106.43, then bouncing over 106.60 into the close. USD-CAD moved from early lows of 1.3228, later topping at 1.3270, then settling under 1.3250. Cable meanwhile, rallied to one-week highs of 1.3143 before settling under 1.3100.

    [EUR, USD]
    EUR-USD posted an inside day on Friday, ranging between 1.1807 opening lows and 1.1851. The USD overall was mixed on Friday, and didn't get much traction from largely better than expected U.S. economic reports. Softer Treasury yields likely kept a lid on the Greenback as well. The 750 bln Euro recovery fund and the fact that Europe seems to be coming through the pandemic in better economic shape than the U.S. has been underpinning EUR-USD, while the lack of agreement on a new U.S. fiscal package has dented USD sentiment.

    [USD, JPY]
    USD-JPY has suffered from pre-weekend position squaring, falling back from post-close high of 107.04 on Thursday, to a low of 106.43 in N.Y trade on Friday. The pairing had printed higher daily highs every day this week, coming from a low of 105.71 on Monday, which appears to have prompted a round of selling to end the week. The risk backdrop has improved slightly going into the London close, which has seen USD-JPY come slightly off its low.

    [GBP, USD]
    Cable rallied to highs of the week on Friday, peaking at 1.3143 in early N.Y. Remarks from the UK's chief trade negotiator David Frost that he thinks a deal with the EU is possible as soon as September helpedthe Pound, along with news that the UK will implement a further post-epidemic reopening this weekend, including some indoor events. A research note by Deutsche Bank arguing that the UK economy will stage a "dramatic" economic rebound in the third quarter also caught some attention. GBP-USD later faded back under 1.3100 in light afternoon trade.

    [USD, CHF]
    EUR-CHF stuck to the mid 1.07 handle through the week. 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 dipped from just under 1.3250 to 1.3228 after the outsized Canada manufacturing gains. The pairing had bounced from overnight lows of 1.3204, though remained above the near six-month low of 1.3190 seen on Thursday. The modest overnight rally came as WTI crude prices fell back to $41.65 lows, after holding the $42 handle through the Thursday session. The pairing hit 1.3270 highs into the close. USD-CAD sell-stops are now reportedly parked under the 1.3190 level.

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