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By XE Market Analysis February 20, 2020 2:47 pm
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    XE Market Analysis: Asia - Feb 20, 2020

    The DXY topped at 99.91 into the N.Y. open on Thursday, levels last seen in April of 2017. The Dollar pulled back some through the morning session, though later headed back to near trend highs. Incoming U.S. data, including a better Philly Fed index, and in-line jobless claims had little FX market impact. Risk-off conditions prevailed however, as coronavirus concerns rose following deaths from the disease in Japan and South Korea. Safe-haven Dollar buying as a result of the virus remains a supportive factor. EUR-USD rallied over 1.0820 from lows of 1.0778, later heading back under 1.0795. USD-JPY remained firm, despite the risk-off conditions, though stayed under the 112.21 high seen in morning trade. USD-CAD dipped to 1.3222 on oil price strength, later topping at 1.3269 on general USD strength. Cable printed 1.2850 lows, before recovering toward 1.2890.

    [EUR, USD]
    EUR-USD recovered to 1.0821 highs, after printing new trend lows of 1.0778 in London morning trade. The pairing has now posted 13 consecutive lower daily lows. The outperforming U.S. economy versus Europe has remained a driver of Euro weakness, while the USD has benefited from on-again, off-again save haven flows, largely due to the uncertainty surrounding the corona virus. The Euro can be expected to remain in sell-the-rally mode going forward, with the next psychological support level now at the 1.0700 mark, with resistance seen between 1.0840 and 1.0850.

    [USD, JPY]
    USD-JPY remained remarkably buoyant, pulling back from near 10-month highs of 112.21 to under 111.75, since bouncing over the 112 mark again. The risk-off session has done little to strengthen the risk-sensitive Yen. The corona virus is in Japan's backyard, with the first deaths from the virus reported in both Japan and South Korea, leading to ramped up concerns both from a human level and an economic level, with talk of an impending Japan recession getting louder. As a result, the USD may be taking over as the safe-haven currency of choice, allowing USD-JPY to rally, despite tumbling stocks. Japan's fiscal year ends March 31, and there has been chatter of early portfolio flows into the Dollar, with pension funds rumored to be behind the move. For USD-JPY, the next upside target comes at 112.41, the April 24, 2019 high.

    [GBP, USD]
    The Pound remained heavy against both the dollar and euro. Above-forecast retail sales data out of the UK, which showed a 0.9% m/m rebound from a 0.5% m/m contraction in December, had little lasting impact, partly with markets more focused on Friday's release of the UK's preliminary PMI survey data for February, which is expected to show an abatement in activity following January's post-election bounce. The median forecast for the UK's flash January composite PMI is 52.7, which would mark a deceleration in overall expansion following January's 53.3 outcome.

    [USD, CHF]
    EUR-CHF touched new trend lows of 1.0604 on Thursday, 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 bounced from session lows of 1.3222, topping just over opening highs of 1.3265. Risk-off conditions, along with general USD strength supported, though the surge in oil prices should limit upside potential for now. The 200-day moving average at 1.3214 has provided support so far this week, with buyers stepping in on moves under the level.

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