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By XE Market Analysis December 27, 2019 12:22 pm
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    XE Market Analysis: Asia - Dec 27, 2019

    The Dollar was softer to end the week, though trade was thin at the height of year-end conditions. Most trader's books have been closed for the year, leaving thin and nervous conditions. There was no data to drive markets today, though Wall Street move to fresh all-time highs, and Treasury yields were a touch lower. EUR-USD advanced to near two-week highs over 1.1170, while USD-JPY ranged between 109.59 and 109.44. USD-CAD hit a two-month low of 1.3074, while Cable rose to 1.3118.

    [EUR, USD]
    EUR-USD rallied to near two-week highs over 1.1170 in N.Y. morning trade, adding to overnight gains, some of which came following an ECB economic bulletin, which noted "signs of stabilization" in the growth slowdown and " a mild increase in underlying inflation". A close over the 200-day moving average, currently at 1.1144, will mark the first time EUR-USD has closed above its 200-dma since late June of 2019. Looking ahead, we look for quiet trade to prevail into the New Year, though expect the dollar to remain firm in 2020, with the U.S. economy expected to hold up and with the Trump administration having incentive to be cooperative on the trade front into the November presidential election. EUR-USD losses may be limited however, as the ECB's easing program has about seen its limits, and as the European economy looks to be past its soft patch seen from earlier in the year.

    [USD, JPY]
    USD-JPY continues to trade near recent highs, peaking at 108.68 highs on Thursday, just under the seven-month top of 109.73 seen in early December, while touching 109.56 highs in early N.Y. Risk-on conditions have provided support of late, aided by seemingly daily record highs on Wall Street, though with year-end looming, and most trading books shut for the year, we look for further sideways price action to remain in place until the start of 2020.

    [GBP, USD]
    GBP-USD traded higher through the Friday session, managing seven-session highs of 1.3118 in N.Y. morning trade. Bot the Pound and the Euro took advantage of some general USD weakness. Brexit will now happen at the end of January, and the UK will enter a 11-month transition period before leaving the EU outright at the end of 2020. Most trade experts think this is too short of a window to negotiate a new trading deal between the UK and EU to be achieved, let alone establish global trade deals. We anticipate that ongoing Brexit uncertainties will limit the pound's upside potential in 2020.

    [USD, CHF]
    EUR-CHF recovered from near three-month lows of 1.0861 seen ahead of the N.Y. open on Monday, later topping at 1.0898. The recovery came as EUR-USD rallied modestly, resulting in a short squeeze from oversold levels. Progess on Brexit and on trade should limit the cross's downside for now.

    [USD, CAD]
    USD-CAD has been on a downward glide path since Thursday, hitting a near two-month low of 1.3074 in North American trade this morning. Continuing risk-on conditions, along with three-plus month highs in WTI crude prices have weighed the pairing down since yesterday. Bigger picture, The CAD will likely continue to gain ground into 2020, as the global trade landscape is brighter following the U.S. House ratifying the USMCA trade agreement, and hopes for a signed phase-one U.S./China trade deal in the near future. Next USD-CAD support is at the October 30 low of 1.3070, then the October low of 1.3038.

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