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By XE Market Analysis December 30, 2019 2:27 pm
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    XE Market Analysis: Asia - Dec 30, 2019

    The Dollar headed lower on the second to last trading day of the year (and decade), with ultra-thin liquidity conditions exacerbating FX moves. Incoming data was generally better than expectations, though did little to support the USD. Wall Street fell on year-end profit takings, while Treasury yields moved higher. EUR-USD rallied to 1.1224 from opening lows of 1.1182, while USD-JPY slid to 108.75 from early highs of 109.23. USD-CAD topped at 1.3077, later falling back to 1.3050, while Cable gyrated between 1.3150 and 1.3110. Choppy conditions are likely to prevail through the remainder of the week, with conditions not set to return to normal until Monday, January 6.

    [EUR, USD]
    EUR-USD ran up to over four month highs of 1.1211 overnight, falling back to 1.1182 lows in early N.Y. trade, and since rallying back to 1.1223. Dollar weakness has been widespread through the session, leaving the DXY near six-month lows. News that the phase-one U.S./China trade deal will be signed this week has prompted some USD selling, as safe-haven flows are reversed into year-end. FX moves however, have been exacerbated due to extremely thin liquidity into the final trading day of 2019 on Tuesday.

    [USD, JPY]
    USD-JPY hit better than two-week lows of 109.07 in Asian trade overnight, after closing Friday at 109.42. Losses in Japan's Nikkei 225 and Topix indices overnight likely were behind the advance of the risk-sensitive Yen. Later, USD-JPY sliced through its 50-day moving average of 108.96, tripping sell-stops in the process. Losses on Wall Street provided the driver, taking the pairing to lows of 108.75. Thin conditions amplified this morning's moves. The next support level comes at 108.71, which represents the 200-day moving average, though a break under there should bring more sell-stops into the market, and open the door for a test of the December 12 low of 108.46.

    [GBP, USD]
    Cable hit a two-week high of 1.3150, with gains partly reflecting broad dollar underperformance and a degree of sterling outperformance, with the UK currency recouping some of the declines seen since mid-month after UK prime minister Johnson implied that he hasn't ruled out a no-deal Brexit at the end of 2020. Trading conditions were thin, with the London inter bank market at skeletal staffing levels until January 2. 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 sort a time frame for a new trading deal between the UK and EU to be achieved, let alone establish global trade deals.

    [USD, CHF]
    EUR-CHF fell to near three-month lows of 1.0848 in ultra-thin N.Y. trade on Monday, down from overnight highs above 1.0900. The move lower came despite EUR-USD rallying to four-month highs over 1.1220, and was likely driven by general risk-off conditions, allowing the Franc to head higher.

    [USD, CAD]
    USD-CAD printed two-month lows of 1.3050, down from overnight highs of 1.3079. General USD softness, along with three-month highs for WTI crude have supported the Loonie of late, with USD-CAD down over 100 points since the start of last week. Year-end trade remains thin however, which may have exacerbated recent moves. The next support level comes at the October 29 low of 1.3038.

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