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By XE Market Analysis February 18, 2020 2:44 pm
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    XE Market Analysis: Asia - Feb 18, 2020

    The Dollar rallied in N.Y. on Tuesday, taking the DXY to four-plus month highs of 99.47. The index was driven higher by EUR-USD's drop to new 34-month lows of 1.0786. A much better than expected Empire State index supported the Greenback early in the session, while renewed coronavirus concerns likely resulted in fresh demand for Treasuries, also a positive for the Dollar. Apple sales and production warnings, along with virus fears saw Wall Street tumble, and yields head lower. USD-JPY was confined to a narrow 109.73 to 109.95 trading band, while USD-CAD was stuck between 1.3279 and 1.32448. Cable opened near 1.3035, later falling back under 1.3000.

    [EUR, USD]
    EUR-USD has rallied from the 34-month low of 1.0786 low seen early in the session, later topping at 1.0825. The initial downdraft came on the back of a much weaker German ZEW report during the European morning session, with the move to lows coming on the heels of a much improved Empire State index. Short covering under the 1.08 level prompted the modest rally. The outperforming U.S. economy should continue to see EUR-USD sold into strength.

    [USD, JPY]
    USD-JPY rallied slightly from opening levels near 109.75, peaking at 109.95 as Wall Street opened lower, but less than futures had been indicating. Since then however, stocks have turned lower, impacted by Apple's negative forward guidance, and by ongoing coronavirus concerns. The pairing has since turned back to near opening levels. Today marks the third session the pairing has failed to print the 110.00 level, as the risk backdrop keeps Yen selling contained.

    [GBP, USD]
    Cable rebounded to a high of 1.3048 after posting a five-day low at 1.2971, later ebbing back some as EUR-USD dropped further into 34-month low territory. News that that the government's 2020-21 budget presentation won't be delayed, and data showing a new record high in employment in the UK, gave sterling a boost. Bigger picture, Brexit remains a worry, with Johnson's government having signaled that it wants divergence from the EU (increasing the risk that the UK could leave the Brexit transition period at the end of the year without a new trade deal with the EU). The EU has stated that there can be no broad free trade agreement with the UK unless Britain is in close regulatory alignment.

    [USD, CHF]
    EUR-CHF remained near trend lows into the close on Tuesday, bottoming at 1.0610, after once again falling further into major-trend low territory on Thursday, printing a base at 1.0608, the lowest level seen since August 2015. The pronounced losses the cross has been seeing are partly a product of safe-haven demand for the franc, and partly as a lasting consequence of the surprising decision by the U.S. to add Switzerland to its list of currency manipulators last month.

    [USD, CAD]
    USD-CAD printed one-week highs of 1.3279, up from overnight lows of 1.3242. The move higher came on the back of sharply weaker oil prices, along with general risk-off conditions. In addition, a Canada manufacturing shipment has weighed on the CAD. The pairing later edged under 1.3250 as crude prices recovered some. The 1.3300 level now marks initial resistance, with support coming at Monday's two-plus week low of 1.3225.

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