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By XE Market Analysis December 3, 2020 2:44 pm
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    XE Market Analysis: Asia - Dec 03, 2020

    Another day, another 32-month DXY low, as the Dollar continues to be hammered broadly. Negative real U.S. interest rates, along with prospects for another round of U.S. fiscal stimulus, along with hopes that the global economy will rebound quickly once Covid vaccines are widely available, have all conspired against the USD. Today' incoming U.S. data was mixed, seeing initial and continuing jobless claims fall more than expected, while the services ISM was a bit light of forecasts. Wall Street was higher, with gains driven by lower than expected initial and continuing jobless claims. The Dow was led by Boeing shares, which rose more than 7% after the FAA recertified its 737 MAX aircraft. The SAP 500 and NASDAQ traded to new intra day highs. Friday's U.S. docket brings the November employment report, along with the October trade report.

    [EUR, USD]
    EUR-USD hit a new 32-month high of 1.2175 in N.Y. morning trade, up from 1.2101 lows seen into the open. Real interest rates in the U.S. remain lower than those in the Eurozone, which has been a weight on the Dollar, while generally risk-on conditions have seen the USD's safe-haven credentials weaken. Prospects for further U.S. fiscal stimulus, along with hopes for a strong economic rebound globally once Covid vaccines are widely distributed in the coming months, should continue to see the Dollar pressured. The next upside EUR-USD target comes at the psych 1.2200 level.

    [USD, JPY]
    USD-JPY has bottomed at 103.67 in N.Y. morning trade, a better than two-week low, and down from overnight highs of 104.54. Dollar weakness has prevailed again today, leaving the DXY at 90.51, a 43-month low. The Dollar index has printed seven-consecutive sessions of lower daily lows. Negative U.S. real interest rates, along with the Fed's lower for longer stance, and perhaps more asset buying in the cards, do not bode well for the USD for now, and while we look ahead to 2021, widespread vaccine distribution should open up economies, and keep equity markets on the rise, another USD negative.

    [GBP, USD]
    Cable traded to a one-year high of 1.3500 in N.Y. late morning trade, rallying from opening lows of 1.2429, and from overnight lows of 1.3354. Remarks by Irish foreign minister Coveney that the EU-UK trade deal can be reached within days gave the Pound an underpinning. Coveney also said that it should be of no surprise that the final phase in negotiations are full of tension. He further remarked that it is "very dangerous" to assume that if there is a no-deal outcome, that a deal would be reached during the first half of 2021, which appears to be a dig at the hawkish stance that France is taking. France has reportedly signaled negotiations should stop, and send the UK out of the common market and customs union without a deal.

    [USD, CHF]
    EUR-CHF steadied in the low 1.08s on Thursday. Positive Covid vaccine news, along with the formal start of the transition to a Biden presidency, turned sentiment higher last week, largely keeping the cross over the 1.08 level. EUR-CHF had struggled to hold the level since the summer, and will likely remain altitude limited going forward unless the risk-backdrop holds up. In addition, the cross will remain under pressure should the ECB embark on further easing in December.

    [USD, CAD]
    USD-CAD printed 1.2857 lows, levels last seen in early October of 2018. The USD overall continues to be battered broadly, with general risk-on conditions, and negative real interest rates weighing on the unit. Aside from USD weakness, CAD strength has come on the back of fairly steady, though relatively firm oil prices. The next USD-CAD downside target is the 1.2800 mark, then the October 1, 2018 low of 1.2782.

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