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By XE Market Analysis February 3, 2020 2:52 pm
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    XE Market Analysis: Asia - Feb 03, 2020

    The Dollar was a bit higher in N.Y. trade on Monday, helped by a much better than expected January manufacturing ISM report. The headline rose above the 50.0 boom/bust line for the first time in five months. Stocks and yields were higher on the session, despite ongoing coronavirus fears. EUR-USD fell to 1.1037 from opening highs over 1.1065, while USD-JPY printed 108.81 highs from early lows under 108.50. USD-CAD rallied to two-month highs over 1.3300 as oil prices slid under $50/bbl. Cable meanwhile, traded under 1.2985.

    [EUR, USD]
    EUR-USD dipped to intra day lows of 1.1037 following the stronger U.S. manufacturing ISM, then bounced to 1.1067 highs into the London close. The pairing had posted seven-session highs of 1.1097 on Friday. General risk-on conditions prevailed through the session, though the coronavirus issue will likely return to haunt markets. As a result, further safe-haven USD buying can be expected, which will likely limit EUR-USD upside for now.

    [USD, JPY]
    USD-JPY peaked at 108.81 in the aftermath of the better U.S. manufacturing ISM, and on sharp opening gains on Wall Street, coming from 108.42 lows into the N.Y. open. Since then, stocks have halved their gains, which has seen the pairing ease back to lows under 108.55. The 200-day moving average at 108.42, and Friday's base of 108.31 are the next support levels.

    [GBP, USD]
    The Pound was down sharply on Brexit anxiety, with the first business day of the UK having legally left the EU being marked by Prime Minister Johnson earlier affirming that the UK will essentially be looking to diverge from EU regulation by stating that the government is looking for either a Canada-style free trade deal with the EU or an Australian one. Since there is no trade deal between the EU and Australia, Johnson's reference to an Australian-style deal is a euphemism for "no deal", with the UK leaving the EU transition period without a new trade deal, and then proceeding with trade on WTO terms. Cable posted a low under 1.2990, down from Friday's 1.3210 peak.

    [USD, CHF]
    EUR-CHF headed lower again overnight, as risk-off conditions were back in force due to the coronavirus outbreak, though rallied slightly in N.Y. trade as Wall Street posted gains. The cross bottomed at 1.0666, after printing highs of 1.0739 last Wednesday. Concerns about contagion of the coronavirus have been affecting market sentiment across the world. The franc had already rallied strongly earlier in January following the surprising decision by the U.S. to add Switzerland to its list of currency manipulators earlier in the week. The U.S. move seems a bit rich given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argues that Switzerland needs a more expansive fiscal policy.

    [USD, CAD]
    USD-CAD printed two-month highs of 1.3268, up from opening lows of 1.3230. The stronger U.S. manufacturing ISM outcome, along with weaker oil prices have supported, and have resulted in six consecutive higher daily highs. WTI crude traded under the key $50 level for the first time in over a year. USD-CAD's November peak of 1.3328 is the next upside target, with support seen at the 200-day moving average of 1.3226.

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