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By XE Market Analysis August 21, 2019 3:35 pm
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    XE Market Analysis: Asia - Aug 21, 2019

    FX activity was extremely muted ahead of the FOMC minutes release, leaving major Dollar pairings largely inside of narrow ranges. Better U.S. housing data supported the USD some through the morning. Later, the dollar showed minimal reaction to the minutes, which didn't reveal strong clues as to the rate path going forward. USD-JPY wiggled between 106.57 and 106.45, then settled to net unchanged near 106.50. EUR-USD meanwhile, dipped from 1.1094 to session lows of 1.1081, then bounced right back to 1.1095. Wall Street held most of its early strong gains, which came following strong retailers earnings, while Treasury yields were little changed. EUR-USD ranged between 11.1107 and 1.1081, while USD-JPY bottomed at 106.35 early, later peaking at 106.60 after the minutes. USD-CAD fell to 1.3251 lows following warmer Canada CPI, while Cable bounced around between 1.2111 and 1.2154.

    [EUR, USD]
    EUR-USD continued to struggle over the 1.1100 mark, topping at 1.1107 at the N.Y. open, then settling back to 1.1093 lows in morning dealings. Traders were largely on hold ahead of the FOMC minutes, as indicated by the extremely narrow trading band. Following the release of the minutes, the pairing dipped briefly to 1.1081 lows, though quickly recovered to near unchanged levels. Range trade is liable to continue into Friday's Powell specch from Jackson Hole.

    [USD, JPY]
    USD-JPY traded inside a narrow range in N.Y., bottoming at 106.35, and topping later at 106.48. Traders kept a foot on the sidelines through the morning, awaiting the minutes from the July 30-31 FOMC meeting. The FX market continued to favor a very dovish tone from the minutes, though with the results being more middle of the road in tone, USD-JPY managed to rally to 106.60 highs.

    [GBP, USD]
    Cable printed an intraday low at 1.2111 in N.Y., later rallying to near net unchanged levels for the week around 1.2150. Sterling looks to have found an equilibrium of sorts over the last week following a protracted, multi-month period of underperformance. UK Prime Minister Boris Johnson met with Germany's Merkel today, though few, if anyone, are expecting any developments beyond rhetorical platitudes. The EU this week resolutely rejected, once again, the possibility for renegotiating the Irish backstop, while Boris, facing existential risk if he fails to deliver a hard Brexit, is not likely to make any concessions at this stage.

    [USD, CHF]
    EUR-CHF has settled around the 1.0850 mark after printing a fresh 25-month low at 1.0835 last Thursday amid volatility in equity markets and recession-portending inversions of the U.S. and UK yield curves, which fed safe haven demand for the Swiss currency (despite the punishing -0.75% deposit rate). While risk conditions have improved since last week, we retain a bearish view of the cross given ECB's course to additional monetary stimulus in September, and the risk of a disorderly no-deal Brexit on October 31.

    [USD, CAD]
    USD-CAD fell to 1.3250 from near 1.3300, matching Monday's low, following the warmer Canada CPI figures. The pairing had been on the decline from the 1.3315 level seen in London morning trade, taking its cue from WTI crude, which rallied to seven-session highs of $56.94 from post-close lows of $55.91. Between firm oil and risk-on conditions, USD-CAD should remain under some pressure for the time being. The pairing later recovered to 1.3295, as oil prices pulled back. Support is at the 20-day moving average of 1.3236 now.

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