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By XE Market Analysis August 26, 2020 3:09 pm
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    XE Market Analysis: Asia - Aug 26, 2020

    The Dollar started the N.Y. Thursday session on a firmer note, getting a brief boost from a much stronger durable orders outcome. Gains were not to last however, as the USD fell broadly through the remainder of the session. The DXY peaked at a four-session high of 93.36, later falling to 92.85 lows. Some position squaring ahead of Powell's Thursday speech was likely behind the moves. Wall Street was again firmer, with both the S&P 500 and NASDAQ printing fresh record highs. Treasury yields rose as the market took profits ahead of Powell. EUR-USD rallied from 1.1772 to 1.1839, as USD-JPY fell from 106.47 to 105.96. USD-CAD opened at 1.3206 highs, hitting a low of 1.3130 in early afternoon. GBP-USD meanwhile, bottomed at 1.3117, later rallying to 1.3219 highs.

    [EUR, USD]
    EUR-USD opened at 1.1772 lows, later rallying to 1.1839 highs after the London close. Traders will keep close to the sidelines ahead of Fed Chairman Powell's keynote (virtual) Jackson Hole address on Thursday. A dovish lean from Powell is widely anticipated, although there is a risk for disappointment in terms of how much he can signal given the FOMC hasn't yet completed its Policy Framework Review. Any sense of disappointment could signal a rebound phase in the dollar, which has been trending lower since March.

    [USD, JPY]
    USD-JPY opened at 106.47, and has slowly made its way to 105.99 lows through the morning session. The pairing does remain inside of Tuesday's trading band, being the preliminary sign of a consolidation period. Given the potential for Fed chair Powell to shake things up on Thursday morning though, we suspect consolidation may not be the case. For now, support is at Wednesday's low of 105.86, with resistance at Wednesday's high of 106.59.

    [GBP, USD]
    Cable hit a low of 1.3117 in early N.Y., later topping at 1.3219, as the USD overall came under pressure ahead of Powell's Jackson Hole speech on Thursday. On the Brexit front, the consensus view is that a deal will be struck. We are wary. There are grounds to doubt there can be anything other than a narrow deal, given the intransigence on the EU's level-playing-field rules and fishing rights. A bare-bones or a no-deal outcome are a risk. Sterling is liable to remain in sell-the-rally mode for the time being.

    [USD, CHF]
    EUR-CHF was steady on Wednesday, 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 has fallen from 1.3206 highs to 1.3130. The pairing has taken its cue from higher oil prices, and a generally positive risk backdrop. WTI crude hit nearly six-month highs of $43.77 earlier in the session, keeping downward pressure on USD-CAD, while further gains in stocks have helped the CAD as well. A move under Monday's 1.3132 low brings the pairing to fresh seven-month lows. Resistance is at Tuesday's 1.3240 high.

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