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By XE Market Analysis August 25, 2020 2:38 pm
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    XE Market Analysis: Asia - Aug 25, 2020

    The dollar was stuck in narrow trading ranges in N.Y. on Tuesday, though remained near its recent highs. The DXY slipped early on, bottoming at 92.97, then bouncing to 93.20. Incoming data help USD sentiment to an extent, as July new home sales surged 13.9%, the most since December 2006. While a softer consumer confidence reading offset to a degree, the firmer Richmond Fed index put a positive spin on things. Wall Street was mixed, with the Dow lagging as shares of Apple, Exxon Mobil and Boeing in particular, underperformed. The S&P 500 and NASDAQ managed small gains. Treasury yields were firmer. EUR-USD topped at 1.1844, later hitting a low of 1.1803. USD-JPY was range bound but managed to touch a 106.57, after opening at 106.25. USD-CAD headed from 1.3175 to 1.3214 highs, while GBP-USD fell from highs of 1.3170, later bottoming at 1.3115.

    [EUR, USD]
    EUR-USD was range bound in N.Y. on Tuesday, hitting a 1.1803 low early, then heading to 1.1844 highs, before drifting back to near the lows after the London close. The DXY continues to hold a safe distance from the two-plus year lows seen last week, as there appears to be light at the end of the tunnel on the virus front, and U.S. economic data continues to improve overall. Friday's 1.1754 low now marks support, with resistance up at 1.1851, representing Monday's high.

    [USD, JPY]
    USD-JPY has been steady between 106.25 and 106.57 since the N.Y. open, up from overnight low of 105.88. Buyers stepped in under the 20-day moving average at 105.92, while the pairing has been capped at the 50-day moving average, which currently sits at 106.58. A mixed risk taking backdrop has kept USD-JPY price action limited today, though generally, the risk-sensitive Yen has been under some pressure for the past week or so, as U.S. economic data improves, and as Wall Street continues to advance.

    [GBP, USD]
    Cable printed a one-week high of 1.3170 in early N.Y., before easing back to the 1.3115 later in the session. Coronavirus cases are on the decline in much of the U.K., while recent U.K. PMIs bode for a least a short term rise in business activity. Brexit uncertainty remains, with clarity on the trade outcome not expected until the EU leaders summit in October. A bear-bones or a no-deal outcome remain a risk. Overall, Sterling gains remain tentative.

    [USD, CHF]
    EUR-CHF was steady on Tuesday, again trading in the mid-1.07s. 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 pulled back from the 1.3240 highs seen overnight, bottoming at 1.3175 in morning North American trade. The pairing fell as oil prices rose, and has since ebbed higher as crude prices dip. The pairing peaked at 1.3111 in late morning trade. Hurricane threats to the northern Gulf coast should underpin crude prices through the end of the week, as production is shut in, and with the potential for rig storm damage likely to limit USD-CAD upside for now.

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