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By XE Market Analysis August 29, 2019 2:17 pm
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    XE Market Analysis: Asia - Aug 29, 2019

    The Dollar was stronger in N.Y. trade on Thursday, lifted by positive developments on the trade war front. China officials said trade talks with the U.S. remain on the table in September, and indicated that for mow at least, there would be no retaliation for the new U.S. tariffs set to be implements on September 1. Wall Street and Treasury yields also rose on the news. EUR-USD fell to near one-month lows of 1.1042 from highs of 1.1092, while USD-JPY perked up to 106.61 from near 106.20. USD-CAD peaked at 1.3317, up from lows near 1.3275, later settling near 1.3300 on strong oil prices. Cable slipped under 1.2180 from highs over 1.2230.

    [EUR, USD]
    EUR-USD traded to near one-month lows, bottoming at 1.1042, down from earlier session highs of 1.1092. The pairing is now withing striking distance of the 27-month low of 1.1027 seen on August 1. General Dollar strength has been a driver through the session, with the positive trade news supporting. In addition, the USD's yield advantage over largely negative yielding EGBs should continue to weigh on EUR-USD going forward. A break through the key 1.1000 psych level will shift overall market sentiment, though there has been some talk of barrier options at the level, which will initially at least, likely be defended.

    [USD, JPY]
    USD-JPY printed one-week highs of 106.61 after the London close, up modestly from 106.19 lows seen at the open. Risk-on conditions have supported since the open, though the initial rally came following reports that U.S./China trade talks are set to continue in September. Further progress on the trade front should see the pairing hold recent gains, though any sign of negotiations breaking down, as has frequently been the case, will likely see USD-JPY quickly reverse lower.

    [GBP, USD]
    Cable was relatively calm, consolidating losses seen Wednesday on news of the UK prime minister's move to suspend Parliament. This has generated a political storm given the length and timing of it, though the government is operating within the rules (such "proroguing" happens each year to allow the government to set out its policy agenda, though this will be the longest in duration -- from September 11 to October 14 -- since 1948). Cable has settled near 1.2200 after yesterday printing a six-day low at 1.2155.

    [USD, CHF]
    EUR-CHF moved from 1.080 to over 1.0910 in N.Y. on Thursday, with CHF selling coming on the back of a return to risk-taking conditions. News that China and U.S. trade talks are still set for September supported the cross EUR-CHF 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 maintained a narrow trading band since the open, bouncing from 1.3273 lows, after finding buyers ahead of the 20-day moving average at 1.3272, later peaking at 1.3317, and since easing back under its 200-day moving average at 1.3306. The pairing was pushed to its lows following news that U.S./China trade talks could resume in September. Focus now shifts to the Canadian economic calendar which will reveal June and Q2 GDP, along with Q2 consumption spending, and July IPPI and RMPI.

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