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By XE Market Analysis August 27, 2019 3:14 pm
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    XE Market Analysis: Asia - Aug 27, 2019

    The Dollar was held to relatively narrow ranges in N.Y. on Tuesday, though the DXY did manage very modest gains, bouncing from 97.89 lows at the open, and later peaking at 98.04. Better than expected U.S. consumer confidence data helped support the Greenback, though mixed signals with regards to the U.S./China trade war, have largely kept the USD ins a holding pattern so far this week. EUR-USD made its way from 1.1109 highs early on, the bottom at 1.1086 after the London close. USD-JPY topped at 106.06, later falling to 105.66 as Wall Street turned red. USD-CAD rallied from 1.3225, peaking just over 1.3285, while Cable printed near one-month highs of 1.2310.

    [EUR, USD]
    EUR-USD traded a narrow range in N.Y. on Tuesday, though spent the morning session slowly grinding lower from early highs of 1.1110, later touching lows of 1.1086. Better U.S. consumer confidence figures helped the Dollar to a degree, while details of Germany's Q2 GDP report revealed weaker than expected investment and consumption figures, which weighed on the Euro. The pairing remains above the three week low of 1.1051 seen last Friday, though given the backdrop of ECB easing, Brexit uncertainty, and the political situation in Italy, we expect that level to be tested, then the 27-month low of 1.1027 seen on August 1.

    [USD, JPY]
    USD-JPY topped at 106.06 in the aftermath of the better consumer confidence outcome, since easing back to 105.66 lows. The modest reversal came as Wall Street flipped opening gains to losses, and as Treasury yields slipped further. The risk-sensitive pairing is likely to remain choppy going forward, as the U.S./China trade outlook remains unclear, with the guidelines seemingly changing on a daily basis. Resistance is at 106.33, the 20-day moving average, with support not until 104.45, the trend low seen on Monday.

    [GBP, USD]
    Sterling turned higher versus the Dollar in N.Y. trade, with Cable printing near one-month highs of 1.2310, as markets downplay the potential for a no-deal Brexit. The Brexit battle will commence next Tuesday, when parliament reopens after the summer recess. Given the level of support in parliament for ruling out the no-deal option, including some members from the government's own Conservative Party, there is a reasonable chance that no-to-no-deal members will succeed. If a no-deal Brexit is legislated off the table, this would increase the odds of there being an extension, which in turn would put Prime Minister Johnson, having promised to deliver Brexit on October 31 in a difficult position.

    [USD, CHF]
    EUR-CHF topped at 1.0915 in early N.Y., later easing to near 1.0875, as risk-on conditions reversed, with the market again doubtful of progress on the trade front. The cross printed 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 traded to two-week lows of 1.3225 in early North American trade, down modestly from early Asian highs of 1.3253. Perkier oil prices provided some support to the CAD in London morning trade, though another trade-fear related crude sell-off saw USD-CAD rally back over 1.3285 later in the session. A Wall Street reversal from early gains to losses also supported. Support is now at 1.3211, the August 14 low, with resistance at the 200-day moving average of 1.3307.

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