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By XE Market Analysis August 28, 2019 2:46 pm
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    XE Market Analysis: Asia - Aug 28, 2019

    The Dollar was little changed in N.Y. on Wednesday, leaving the DXY contained inside of a 98.22 to 98.13 trading range. There was nothing in the way of data to move markets, while Wall Street gained, and the U.S. Treasury curve remained inverted. Concerns over the U.S./China trade outlook took a breather today, with no news taken as good news. EUR-USD slipped from opening highs over 1.1095, bottoming at 1.1074. USD-JPY touched 106.00 from 105.65 lows on improved risk-taking levels, while USD-CAD edged to 1.3288 lows from near 1.3320 on firmer oil prices. Cable meanwhile, recovered from one-week lows seen in London, topping at 1.2250.

    [EUR, USD]
    EUR-USD touched four-session lows of 1.1074 in morning trade, down marginally from 1.1098 highs seen into the open. A sub-forecast reading in the German July Ifo index and German Q2 GDP, have upped the odds for meaningful ECB stimulus in September has weighed on the Euro, as has the uncertainty over the Brexit outcome. 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 recovered from opening lows of 105.65, managing to rally to 106.00 after Wall Street turned higher. Treasury yields remain lower however, acting to limit the pairings upside potential. Bigger picture, the risk-sensitive USD-JPY may still have room to run lower, as flare ups in the U.S./China trade war are likely to continue. There is little sign of progress, or even talks under way, as additional tariffs on Chinese goods are set to kick in on Sunday. Monday's 33-month low of 104.45 is the next downside target.

    [GBP, USD]
    Sterling dropped sharply on news that Boris Johnson is taking the "proroguing option" -- closing down parliament from mid September. This was highly controversial given the timing ahead of the Brexit deadline on October 31 as it will greatly reduce the time opposition members will have in their attempts to prevent a no-deal Brexit. Cable fell to one-week lows of 1.2155 into the N.Y. open, though later recovered to 1.2240 after the London close. The Brexit saga will continue to see the Pound in sell-the-rally mode.

    [USD, CHF]
    EUR-CHF was in a holding pattern in the upper 1.08s N.Y. on Wednesday, during a largely uneventful session. 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 pulled back to North American session lows of 1.3297 from 1.3316 highs seen earlier, taking its cue from oil prices, which rallied about $1/bbl in the same time frame. WTI crude rallied on the back of a much larger than expected inventory draw, as reported by the API on Tuesday. The EIA inventory report corroborated the API, revealing a 10.0 mln bbl draw, which resulted in a spike in oil prices, and a USD-CAD move to session lows of 1.3288 from just over 1.3300.

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