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By XE Market Analysis August 20, 2020 3:02 pm
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    XE Market Analysis: Asia - Aug 20, 2020

    The Dollar came under broad pressure from mid-morning on Thursday, as if appeared the FOMC minutes driven boost has about run its course. In the scheme of things, even if the minutes were not as dovish as expected, the Fed continues to be in uber-easing mode, continuing to buy assets while virtually targeting the yield curve. In addition, interest rates are to stay near zero for years. As a result, the USD may remain under pressure for the foreseeable future, especially in COVID cases keep the U.S. economy constrained. The modest Dollar rally seen since Wednesday afternoon, may have been enough to bring USD bears back into the market at better levels. EUR-USD rallied to 1.1803 to 1.0866, as USD-JPY attempted to rally from 105.77 lows, though struggled over the 106.00 mark. USD-CAD peaked early at 1.3244, later bottoming near 1.3170. GBP-USD, meanwhile, headed from 1.3080 to 1.3204.

    [EUR, USD]
    EUR-USD advanced to N.Y. session highs of 1.1866 after hitting a one-week low of 1.1803 earlier in the session. The dollar initially rallied despite the softer claims data, as early focus remained on fallout from the less dovish tan expected FOMC minutes on Wednesday. As risk taking levels perked up some though, the USD came under further pressure as Treasury yields fell. The market mat have over-interpreted the minutes, and the quick USD rally may have been enough to bring USD bears back into the market.

    [USD, JPY]
    USD-JPY bounced back from the lows of 105.77 seen in the aftermath of the worse than expected jobless claims, later climbing back to 106.05 highs. The pairing had peaked at 106.21 during the Asian session, getting a lift from fallout from the FOMC minutes on Wednesday, which indicated the Fed is in no hurry to ease policy further. From here, Treasury yields and risk taking levels will drive USD-JPY direction, though it appears for now the minutes driven USD rally may have run its course. The pairing later touched 105.76 lows.

    [GBP, USD]
    Cable printed a six-day low at 1.3065 in London morning trade, extending the sharp correction from yesterday's eight-month peak at 1.3268. The pairing recovered some into the N.Y. open, fell back to 1.3080 after the U.S. jobs data before topping at 1.3204 in afternoon trade on a broadly weaker USD. Pound strngth going forward may be limited, as the U.K. risks a no deal trade outcome with the EU, or only a narrow deal. We also anticipate the UK's economic recovery from full lockdown to plateau in the weeks and months ahead.

    [USD, CHF]
    EUR-CHF rotated higher on Wednesday, which produced a two-month high at 1.0853 and about a half-a-big-figure lift in the trading range of the cross. The gains coincided with a strong risk-on vibe in global markets as Apple reached a $2 tln market capitalization and the S&P 500 and NASDAQ indices scaled to record highs. The franc, an historic low-beta safe-haven currency, periodically correlatives inversely with global stock market direction, along with sentiment about the EU (Switzerland's biggest trading partner). The influence of the SNB's intervening hand may have been at play this week, too. Total Swiss sight deposits of francs have risen by 130 bln since the pandemic and consequential lockdowns took a grip on global markets back in March. Sight deposits can be viewed as a proxy marker of SNB intervention to sell francs in forex markets (after buying foreign currencies), which results in the crediting of newly created francs at commercial banks sight accounts.

    [USD, CAD]
    USD-CAD printed four-session highs of 1.3244, up from pre-open lows of 1.3196. The slight dip seen after the early U.S. data didn't last long, and the USD overall moved briefly higher. The less dovish than expected FOMC minutes late on Wednesday was the early driver of Greenback strength, along with soft oil prices which saw WTI crude move under the $41.70 mark, down from Wednesday's two-week high of $43.22. USD strength didn't last long, however, as it came under broad pressure at mid-morning, and as WTI crude fully reclaimed early losses. USD-CAD subsequently fell back to 1.3171 lows.

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