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By XE Market Analysis December 29, 2020 2:15 pm
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    XE Market Analysis: Asia - Dec 29, 2020

    The Dollar was lower in N.Y. on Tuesday, weighed down by the signing of the stimulus bill, and prospects for direct payments to individuals to rise to $2,000 from $600. The U.S. House voted to increase the amount of payments, while the Senate is expected to vote on the measure at some point on Tuesday or Wednesday. The DXY fell from overnight highs of 90.22, later bottoming at 89.86, before reclaiming the 90.00 handle. There was no top tier data to move markets. Wall Street opened on a stronger footing, though gave back gains through the session. Wednesday's economic calendar picks up, with jobless claims, advance trade, Chicago PMI, and the pending home sales index.

    [EUR, USD]
    EUR-USD took out the 32-month high of 1.2273 seen on December 17, topping at 1.2275, and up from post-close lows of 1.2209. The Dollar overall has come under pressure this morning, leaving the DXY at seven-session lows of 89.94. The signing of the Covid stimulus bill, and rising expectations for even more aid, in the form of $2,000 direct payments is the likely driver of USD weakness this morning, though ultra-thin trading conditions have likely exaggerated moves. Major EUR-USD resistance is seen at 1.2300, with buy-stops expected to be parked just above the level. The pairing later retreated to 1.2240 after failing to breach the 1.2300 mark.

    [USD, JPY]
    USD-JPY eased from 103.76 highs seen at the open, bottoming at 103.52 at mid-morning. Range trade has remained in place, and should continue to do so through year-end, as traders close their books. The USD is expected to fall further in the new year, as investors are expected to rotate into cheaper equities around the world, and out of U.S. stocks, which are viewed by many as overpriced at current valuations.

    [GBP, USD]
    GBP-USD steadied on either side of 1.3500 in N.Y. morning trade, after falling quite sharply on Monday. The move lower came on a "sell the fact" reaction to last week's Brexit trade deal, which had been fully priced into Sterling. Market talk has started to turn away from Brexit though, despite the huge uncertainties of how the U.K. economy will respond to its new freedoms, and toward Scotland, where another independence referendum could be in the cards at some point. While perhaps not in 2021, an independent Scotland would almost certainly be Pound negative. In the meantime, traders will likely enter a wait and see period in order to determine how bad the post-Brexit headaches are.

    [USD, CHF]
    The SNB maintained policy settings in December and reaffirmed once again that it will use direct intervention on currency markets to keep a lid on the "highly valued" currency, despite the fact that the U.S. now official labels Switzerland as currency manipulator. There was no real surprise in the statement, with the central bank highlighting that Covid-19 is "continuing to have a strong adverse effect on the economy". The bank expects consumer prices to fall sharply this year and to stay around zero over the next two years, also thanks to a strong CHF. EUR-CHF traded to two-week highs of 1.0850 following the SNB announcement, and has remained above 1.0800 since.

    [USD, CAD]
    USD-CAD fell to six-session lows of 1.2780, down from Monday's closing level of 1.2850. General USD weakness this morning weighed, as the unit has lost ground to all major currencies. Risk-on conditions were a factor in that move, which in turn helped the CAD. Oil prices remain off Monday's highs, but are well above overnight lows, also a CAD positive. The December 18 low of 1.2717 is the next USD-CAD support level, with resistance now at 1.2814, which represents the 20-day moving average.

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