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By XE Market Analysis August 30, 2019 2:49 pm
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    XE Market Analysis: Asia - Aug 30, 2019

    The DXY traded to better than two-year highs of 99.02 in N.Y. on Friday, up from morning lows of 98.41. The Dollar's yields advantage over the Euro and Yen in particular, including easing central banks, have supported the Greenback of late, as has the relative outperformance of the U.S. economy. Friday's U.S. data was generally positive, allowing Treasury yields to inch higher. EUR-USD printed 27-month lows of 1.0963, down from early highs of near 1.1050. Early USD-JPY losses stalled at 106.11, later rallying to 106.42 highs. USD-CAD fell to 1.3248 after stronger Canada GDP data, though a sell-off in WTI crude later took that pairing over 1.3325. Cable attempted to rally into the London close, but was later pushed to 1.2140 lows on ongoing Brexit fears.

    [EUR, USD]
    EUR-USD has nose dived to fresh 27-month lows of 1.0963, with a wave of sell-stops kicking in on the break under 1.1027, which was the August 1 trend low. With the Euro now through the key 1.1000 mark, follow through selling may be in the cards going forward. Fundamentally, the Euro remains in sell-the-rally mode, with slow EU growth (recession in Germany?), an ECB in stimulus mode, Italian political concerns, and Brexit uncertainties all set to conspire against the EUR.

    [USD, JPY]
    USD-JPY dipped from early highs of 106.32, bottoming at 106.11 at mid-morning. Early selling was seen into the end of the month, with Japan accounts notable Yen buyers. The pairing perked up again into the London close, topping at 106.42 in light pre-long weekend trade. There was little news on the trade front, though China noted ongoing talks at various levels in continuing, which may have provided USD-JPY some support through the session. Looking ahead, direction will continue to be influenced by progress on trade negotiations, and the general level of rusk appetite.

    [GBP, USD]
    Cable ended August trade at near lows of the week, dropping to 1.2140 lows into the N.Y. close on Friday. UK Prime Minister Boris Johnson's moved to suspend Parliament weighed on the Pound through much of the week. Opposition parties now look likely to attempt to bring down the government by a confidence vote as soon as next week, having seen this as a last resort option. Cable has settled back under 1.2200, but remains comfortably above the 28-month low seen on August 11 at 1.2015.

    [USD, CHF]
    EUR-CHF pulled back under 1.0870 from over 1.0920 in N.Y. on Friday, with the driver being EUR-USD's breakdown to 27-month lows of near 1.0965. News that China and U.S. trade talks are still set for September supported the cross on Thursday, though those gains were unwound on Friday. 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 fell to 1.3248 from over 1.3275 following the stronger Canada Q2 GDP outcome. The pairing had been on the decline from London morning highs of 1.3311, with sellers emerging on the move above the 200-day moving average at 1.3308. Relatively firm oil prices also limited upside through much of the week. Later, as oil prices fell as much as 3%, USD-CAD rallied back to 1.3325. Bigger picture, USD-CAD has remained mired inside of a relatively narrow 1.3200 to 1.3350 trading band throughout much of August, and will need to move decisively out of this range to firm up the next directional play.

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