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By XE Market Analysis December 2, 2019 3:13 pm
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    XE Market Analysis: Asia - Dec 02, 2019

    Weak manufacturing ISM and construction spending conspired against the Dollar and Wall Street in N.Y. on Monday,taking the DXY to eight session lows of 97.82 from 98.38 into the open. The data, along with talk of the imposition of U.S. tariffs on Brasil and Argentina dented sentiment, while hopes for a phase one trade deal ebb and flow depending on the day. USD-CAD was range bound through the session, and will likely consolidate into the BoC policy announcement on Wednesday (no rate change expected). EUR-USD ran up to 1.1090 from opening lows of 1.1020, while USD-JPY fell to 1.0895 from pre-data highs of 109.61.Cable lingered on either side of 1.2935 after rallying to 1.2942 before the open.

    [EUR, USD]
    EUR-USD rallied quite sharply through the session, finding support from weak U.S. ISM and construction data, following improved European PMIs and also from comments from ECB's Lagarde, who highlighted side effects from negative rates and signaled that the Bank will be focusing on the revision on the policy framework, rather than adding to the easing measures already in place. This took some wind out the sails of those in the further stimulus camp. The pairing had bottomed at 1.1003 into the N.Y. open, later printing eight-session highs of 1.1090. The November 21 highs of 1.1097 is resistance, with support now at 1,1041 and 1.1038, representing the 50- and 20-day moving averages, respectively.

    [USD, JPY]
    USD-JPY traded to five-session lows of 108.95, down from 109.61 highs early in the session, and six-month highs of 109.73 seen in Asian trade overnight. A soft U.S. manufacturing ISM print, and subsequently lower equities and yields weighed. New U.S. tariff threats on Brazil and Argentina, along with fresh doubt for a phase one U.S./China trade deal following Trump's signing of the bill supporting Hong Kong civil rights, will support the risk-sensitive Yen going forward. The 200-day moving average at 108.90 provides USD-JPY support from here.

    [GBP, USD]
    Cable ran up to 1.2942 from 1.2895 ahead of the open, and into the weak U.S. 10:00 EST data, which was supportive of the Dollar. The pairing then stabilized on either side of 1.2935 into the close. In the UK, final November manufacturing PMI was unexpectedly revised higher, though to little market impact with weekend opinion poll showing the Labour party to have narrowed the gap on the Conservatives. Politicos poll tracker is showing the Conservative party with 43% support, unchanged from Friday, and Labour with 32% support, up a point from Friday. Incoming polls will be scrutinized for signs of a late surge in support, though with the election looming next Thursday, it is still looking likely that PM Johnson's Tories will be returned to parliament with a working majority.

    [USD, CHF]
    EUR-CHF rallied to a one-month high at 1.1027 in overnight trade. Recent gains have returned the cross to the upper portion of a broadly sideways range that's been persisting over the last three months. The N.Y. session saw the cross retrace to 1.0983 lows, as risk-off conditions set in.

    [USD, CAD]
    USD-CAD recovered modestly from overnight lows of 1.3270, topping at North American highs of 1.3306 in late morning trade. New U.S. tariffs to be imposed on Brazil and Argentina, along with potential impact on any U.S./China trade agreement following Trump's signing of the bill supporting Hong Kong civil rights, have weighed on the CAD. WTI crude prices were as much as 2% higher early on, though remain well under recent highs, following Friday's 5% plunge, which has also put a floor under USD-CAD.

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