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By XE Market Analysis February 27, 2019 3:13 pm
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    XE Market Analysis: Asia - Feb 27, 2019

    The Dollar ticked higher in N.Y. on Wednesday, taking the DXY from trend lows of 95.88 seen into the open, later peaking at 96.19. It appeared some USD buying stepped in on a lack of encouraging U.S.-China trade news, resulting an uptick in safe-haven flows, along with firmer Treasury yields. Incoming U.S. data was mixed, with the advance trade deficit ballooning, factory orders missing the mark, and pending home sales rising sharply. EUR-USD fell from 1.1403 to 1.1363, while USD-JPY topped over 111.00. USD-CAD bottomed at 1.3118, while Cable printed 7-month highs of 1.3350.

    [EUR, USD]
    EUR-USD was range bound through the session, coming off of pre-open highs of 1.1403, a three-week high, later falling to 1.1363 lows. The pairing continues to be influenced by its 50-day moving average, currently at 1.1387, and the 1.1400 mark, which has lured selling interest yesterday and today. The market remains cautious over U.S.-China trade talks, and the longer time passes with no positive news, the more likely safe-haven flows into the dollar will increase.

    [USD, JPY]
    USD-JPY rallied from overnight lows of 110.36, since topping over 111.00. Japanese accounts are said to be on the offer from 111.00, with Yen repatriation backed selling expected ahead of Japan's fiscal year end at the end of March. Overnight losses came as the risk-sensitive yen reacted to geopolitical events, namely the skirmish between India and Pakistan. Since then, the pairing has risen modestly from near 110.60 at the open, likely due to firmer Treasury yields, and despite the soggy risk backdrop.

    [GBP, USD]
    Cable printed a seven-month high at 1.3350. We estimate that the UK currency is still changing hands at a trade-weighted discount of some 11% compared to levels prevailing ahead of the vote to leave the EU in June 2016. The gains on the year so far reflect an unwinding in this discount, with the latest phase sparked yesterday after the UK prime minister put in an option for parliament to vote on a three-month delay in Brexit, which will happen on March 14 in the event that, 1, the government's withdrawal deal fails to win sufficient support in the House of Commons, and 2, a subsequent vote on leaving the EU without a deal, which has been set for March 13, also fails. We expect the Pound will remain upwardly mobile for now.

    [USD, CHF]
    EUR-CHF rallied to 1.1393 in N.Y. on Monday, a two-week high, and above its 20-day moving average. The move came in tandem with EUR-USD's rise to three-week highs just over 1.1400. 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 under performance 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."

    [USD, CAD]
    USD-CAD initially ticked up to 1.3155 from 1.3145 following the in-line Canada CPI outcome, though sellers quickly emerged, taking the pairing to session lows of 1.3118, as the Greenback came under some modest early pressure following the record high U.S. goods deficit seen in December. The pairing later steadied near 1.3150 on reported short covering. USD-CAD support is now at Monday's low of 1.3113.

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