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By XE Market Analysis January 2, 2020 2:31 pm
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    XE Market Analysis: Asia - Jan 02, 2020

    The Dollar chopped around in N.Y. on the first trading day of the year, ultimately edging higher on the session. The DXY peaked at 96.87, up from lows of 96.56 in morning trade. Incoming data was uneventful, with jobless claims a bit higher than expected, and the Markit manufacturing PMI little changed. Wall Street took its cue from overnight Asia and Europe, rallying to new record highs following China's announcement of new stimulus plans. EUR-USD ranged between 1.1203 and 1.1164, ending near its lows. USD-JPY was heavy in morning trade, bottoming at 108.25, later pushing over 108.50. USD-CAD fell from 1.3009 highs to 1.2974, later recovering over 1.3000. Cable was soft, dropping from over 1.3200 to 1.3115 lows.

    [EUR, USD]
    EUR-USD retraced modestly lower from the near five-month highs of 1.1241 seen on Tuesday, bottoming at 1.1164, though remained choppy in still thin liquidity trade. The theme this week and last, had been Dollar weakness, with the Greenback losing ground across the board. Year-end considerations were the drivers, as safe-haven USD flows were reversed on shifting sentiment that global growth will improve in 2020 on the back of a cheerier trade outlook, and signs of a manufacturing recovery. Trading conditions will not get back to normal until Monday, when the holiday season will be unofficially over.

    [USD, JPY]
    USD-JPY was on 108.25 in morning trade, near two-month lows, and down from near 108.80 at the open. Sellers stepped in as Wall Street moved off its best levels. A break below the December base of 108.42 saw sell-stops reportedly tripped at 108.40. The Dollar overall has been under some pressure for over a week now, largely on year-end pressures, as safe-haven flows are reversed ahead of what is expected to be a year where global growth improves. With thin conditions prevailing into the New Year, however, USD-JPY sellers have remained in charge. Under 108.25, the November 1 low of 107.89 comes into focus.

    [GBP, USD]
    Cable fell from over 1.3210 into the N.Y. open, later dropping to 1.3115 lows after the London close. The losses retraced some of the gains seen during the low-volume markets over the holiday period, and come with market narratives highlighting expectations for tough negotiations ahead for the UK with the EU and other global economies and trading blocs. The reality is that it will take years to replicate the trading terms the UK has enjoyed as part of the EU's single market, along with the 40 trade deals the EU has with some 70 other economies and trading areas.

    [USD, CHF]
    EUR-CHF dove to a three-month low at 1.0837, which is the new culmination of quite a sharp drop from the seven-week peak of December 13, at 1.1033. The high was seen on news of the strong election victory of the Conservative Party at the UK's election, though the euro, tracking sterling, came back under pressure after UK PM Johnson implied that the no-deal threat was still an option.

    [USD, CAD]
    USD-CAD has recovered some from the beating it took ahead of the New Year holiday, topping at 1.3009, up from the 14-month low of 1.2949 seen on Tuesday. Price action related to year-end selling was distorted during the first half of the week, as thin conditions amplified moves. Short-covering has been the driver behind today's bounce, though positive developments on the trade front, along with firmer oil prices as 2020 kicks off, should place USD-CAD in a sell-the-rally stage for the time being.

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