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By XE Market Analysis August 21, 2020 1:33 pm
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    XE Market Analysis: Asia - Aug 21, 2020

    Friday saw the Dollar put in a little distance from the 27-month lows seen earlier in the week. The DXY topped at 93.47 up from 92.58 overnight lows, and the trend lows of 92.13 seen on Tuesday. The Greenback found some support from the uptick in the August Markit manufacturing and services PMIs, along with a record rise in existing home sales. Wall Street largely struggled above water as the desire for risk waned. The usual suspects were at play -- virus, recovery, and politics. Treasury yields were flat to slightly lower. After falling overnight, EUR-USD was range bound, though did manage a fresh low of 1.1755. USD-JPY headed from 105.65 to 106.07. USD-CAD bucked the trend a bit, falling under 1.3200 as oil prices firmed. GBP-USD opened near 1.3125, later dropping to 1.3060.

    [EUR, USD]
    EUR-USD had been on the downswing in London morning trade following softer European PMIs, falling from 1.1883 highs to 1.1766 lows at the N.Y. open. The pairing largely turned sideways from there, topping at 1.1790 before printing eight-session lows of 1.1755 in the aftermath of better U.S. Markit PMIs and record existing home sales. The next downside target will be the August 12 low of 1.1710, while the 20-day moving average at 1.1807 is interim resistance.

    [USD, JPY]
    USD-JPY hit an early low of 105.65, later rallying to 106.07 following the better PMI and home sales data. The pairing subsequently drifted between 106.00 and 105.85. Impact from the less dovish than expected FOMC minutes on Wednesday, which indicated the Fed is in no hurry to ease policy further has continued to provide a modicum of support. From here, Treasury yields and risk taking levels will drive USD-JPY direction.

    [GBP, USD]
    Cable hit six-session lows at mid-morning in N.Y., bottoming at 1.3060. The move came on a broadly higher USD, and as this week's round of trade discussions between the EU and UK ended with no agreement. EU chief negotiator said that he was "disappointed, concerned and surprised" while his UK counterpart, Frost, accused the EU of being "unnecessarily difficult." Data today included above-forecast July retail sales and August preliminary PMI figures, with the latter inflated by a government stimulus scheme to boost the restaurant and pub business, which will expire at the end of the month. We also anticipate the UK's economic recovery from full lockdown to plateau in the weeks and months ahead.

    [USD, CHF]
    EUR-CHF hit an eight-session low of 1.0734 on Friday. The move lower came ass soft EU PMIs weighed on Euro broadly. 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 held a narrow 1.3205 to 1.3235 trading band since the North American open, coming from overnight lows of 1.3157. Stumbling oil prices supported the pairing overnight, though the CAD perked up some following the strong Canadian retail sales outcome. WTI later recovered from its low of $41.77, trading back over $42.30, which took USD-CAD just to just under the 1.3190 level. Wednesday's seven-month low of 1.3133 marks support now, with resistance up at Thursday's 1.3246 high.

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