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By XE Market Analysis February 21, 2019 3:05 pm
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    XE Market Analysis: Asia - Feb 21, 2019

    The DXY bottomed early in the session following softer U.S. data, though then recovered through the morning session. The index based at 96.36, later topping at 96.66. Treasury yields rose on reports the U.S. and China are closer to a trade deal, which helped support the Dollar. EUR-USD fell to 1.1323 lows from near 1.1365, as USD-JPY rallied to 110.83 from early lows of 110.56. USD-CAD made modest upside progress as WTI crude prices dipped from trend highs. Cable managed to hold over 1.3000.

    [EUR, USD]
    EUR-USD touched session lows of 1.1323 into the London close, after peaking at 1.1366 following the early round of U.S. data. Minutes from the last ECB meeting brought up the potential for further ECB market funding, which appeared to weigh on the Euro. Today marks the third straight day the pairing has been unable to hold over its 20-day moving average, currently at 1.1364.

    [USD, JPY]
    USD-JPY was confined to a 110.72 to a 110.56 band early in the session, covering the entire range within 5-minutes following the 8:30 EST round of data. The pairing later edged up to 110.81 highs. Hopes for progress in the high level U.S.-China trade talks underway in Washington today provided some support, largely offsetting the risk-off conditions seen through most of the session. For now, it appears range trade is set to continue.

    [GBP, USD]
    Cable eased from recent highs, though remained above the 1.3000 mark through the session. The gains reflect a partial unwinding in the pound's Brexit discount, although the situation remains thickly clouded in uncertainty. Through the mists, however, there is a cautious belief that a no-deal Brexit -- despite being deliberately hung out as a political persuasion tool -- will be avoided. Countless businesses on both sides of the channel, and in North America and Asia, have warned about the consequences of a no deal, and Fitch Ratings said the UK risked a prolonged recession and losing its AA rating in this scenario.

    [USD, CHF]
    EUR-CHF has settled in the mid 1.1300s after correcting from a six-day high that was seen last Tuesday at 1.1406. The price action has continued a phase of relatively high volatility that the cross has been experiencing. Since early January there have been several bouts of pronounced underperformance in the Swiss franc, often accompanied by talk/suspicions of SNB intervention. SNB vice president, Zurbruegg, said last month that the franc "remains highly valued" and the situation on foreign currency markets is "still fragile" and that the SNB's two pillar strategy of negative interest rates and ad-hoc currency interventions, or threat thereof, "remains appropriate." SNB Chairman Jordan said recently that for 2019 the biggest concerns are "political mistakes," pointing to the U.S.-China trade war and "Brexit and the European situation." Jordan also expressed concern about further safe-haven driven franc appreciation, "especially" in a no-deal Brexit scenario.

    [USD, CAD]
    USD-CAD rallied modestly through the session, after bottoming at 1.3163 into the North American open. WTI crude pulled back from trend highs of $57.59, later bottoming at $56.65, which has been mildly supportive of the pairing. USD-CAD later topped out at 1.3217. In a speech, BoC chief Poloz said the path back to neutral range is highly uncertain, while he also said that rates need to rise back to neutral over time. Key for the policy outlook is that Poloz said "As we said at the Bank’s most recent interest rate announcement, we judge that we will need to move our policy rate up into a neutral range over time..." He repeated that the Bank remains "decidedly data dependent." There was little market reaction to the comments.

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