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By XE Market Analysis August 17, 2020 2:58 pm
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    XE Market Analysis: Asia - Aug 17, 2020

    The Dollar was lower to start the week in N.Y. with persistent USD weakness coming from various crosscurrents, including the lack of a stimulus bill, COVID uncertainty, and political uncertainty ahead of the November elections. The DXY hit a low of 92.78, down from 93.10 highs ahead of the open. This marked the lowest in seven-sessions. The only data point was the Empire State index, which was softer than expected, which weighed modestly on the USD. Wall Street was mixed, with the NASDAQ posting fresh all-time highs and the Dow lagging, while Treasury yields were lower. EUR-USD made its way from under 1.1835 into the open to a high of 1.1882, while USD-JPY dipped briefly under 106.00 from opening highs of 106.75. USD-CAD matched last week's trend low at 1.3190. GBP-USD was choppy between 1.3075 and 1.3113.

    [EUR, USD]
    EUR-USD printed a seven-session high of 1.1882 early in the N.Y. session, after touching 1.1833 into the open. The pairing has since steadied near 1.1870. The Euro is now within range of its 25-month high of 1.1917 seen on August 6. Dollar weakness has persisted, as U.S. politics, between the lack of stimulus bill, and uncertainty over the November presidential election keep a lid on the USD. In addition, despite signs of peaking in the U.S., the virus remains an issue, as it clouds the economic outlook. Dip-buying should remain in fashion for the foreseeable future.

    [USD, JPY]
    USD-JPY touched one-week lows of 105.94 after the London close, within sight of last week's 105.71 base. The Yen has risen despite the horrendous Japan GDP report released overnight, and the generally risk-on conditions, though lower Treasury yields have offered some pressure on the pairing. With the USD losing status as a safe-haven, Yen gains today are likely partly due to U.S./China tensions. The phase-one trade deal meeting initially scheduled for this past weekend was postponed indefinitely, while issues on tech, including Huawei and TikTok remain, and may give interim support to the JPY.

    [GBP, USD]
    Cable was choppy through the session, ranging between 1.3120 and 1.3074, eventually steadying over 1.3100. Indications that the EU and UK will reach a trade deal remain good, though the breadth of the deal remains uncertain, and won't likely be clear until October's EU leaders' summit. The COVID recovery path is likely to plateau, exacerbated by a number of localized lockdowns across the UK and new travel restrictions with foreign countries. The government's furlough scheme will end in late October, too, which is likely to trigger a wave of job losses. Overall, we don't for now anticipate much upside potential for the pound.

    [USD, CHF]
    EUR-CHF stuck to the mid 1.07 handle through lastweek, and remained that way on Monday. 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 1.3202 lows in early North American trade, coming from overnight highs of 1.3263. The move lower comes as the Greenback loses ground broadly, and as WTI crude moves over $42.50, up from $41.80 at the open. The USD remains in sell-the-rally mode, as sagging Treasury yields, the more recent impact of the pandemic in the U.S. relative to other parts of the world and the political stalemate over the new pandemic relief package weigh. USD-CAD later fell to 1.3190, matching last week's near seven-month low of 1.3190.Resistance at Friday's 1.3206 high.

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