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By XE Market Analysis January 3, 2019 2:58 pm
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    XE Market Analysis: Asia - Jan 03, 2019

    The Dollar bounced in N.Y. trade on Thursday following the firmer ADP jobs report, though later fell sharply as the U.S. manufacturing ISM came in much weaker than forecast. The data added another layer of market worry to global growth slowing, while saw the market price out pretty much all 2019 Fed tightenings. The DXY fell from highs of 96.73 after the jobs report, then sliding to 96.21 after the ISM. EUR-USD topped at 1.1411 after basing at 1.1338, while USD-JPY slid to 107.11 from early highs of 108.00, before later topping at 108.30. USD-CAD based at 1.3467, while Cable peaked at 1.2648.

    [EUR, USD]
    EUR-USD touched 1.1410 highs after the disappointing manufacturing ISM, up about 70 points from post-ADP lows of 1.1338. The big ISM miss has amplified concerns over global economic slowing, and the latest round of soft data has seen fed fund futures rally further, weighing heavily on the Dollar, as the market prices out future Fed rate hikes. The DXY has moved from 95.73 seen earlier, to 96.22 after the ISM.

    [USD, JPY]
    USD-JPY pulled back to 107.70 after printing just over 108.00 in the aftermath of the better ADP jobs outcome. While U.S. equity futures moved well off their early lows, Wall Street opened sharply lower. The brief spike in USD-JPY was quickly taken advantage of, allowing traders to sell into better levels. Indeed, the pairing fell to 107.11 after the dismal U.S. manufacturing ISM report, before bouncing to 108.30, then settling near 107.80. The "flash crash" seen after the N.Y. close on Wednesday, which saw the pairing collapse to the 105.00 region, was attributed to a very thin market. N.Y. had closed its books, Japan was on holiday, leaving just Australia and New Zealand to provide liquidity. Reports on Thursday indicated that the Bank of Japan is set to trim inflation outlook for the next 2-years, according to Nikkei online, while considering lowering the fiscal 2019 CPI forecast to 1.0% from 1.4% and a minor tweak lower in the 2020 CPI forecast from 1.5% currently. There was little reaction on USD-JPY,as not really a surprise given slowing global growth led by China.

    [GBP, USD]
    Cable rallied through the N.Y. session, opening near 1.2560, and bouncing to 1.2648 highs. The overnight low was seen on broader Dollar strength amid a rush for safe havens following Apple's discouraging guidance, though reversed higher following the weak U.S. manufacturing ISM, which saw the Greenback trade broadly lower. Brexit uncertainty continues to endure. The EU rejected the latest efforts by UK Prime Minister May to win concessions on the Irish board backstop, and it continues to look likely that her deal will be voted down at the upcoming parliamentary vote.

    [USD, CHF]
    EUR-CHF has continued to gravitate around 1.1250-1.1300. The cross has remained comfortably above the two-and-a-half month low seen in December at 1.1225. The SNB remained firmly on hold at its quarterly policy meeting last month, continuing to rely on the combination of negative interest rates and the threat of intervention to limit appreciation in the currency in times of heightened uncertainty about the global outlook.

    [USD, CAD]
    USD-CAD opened near 1.3620, levels, which was the highs of the session. It was all downhill from there for the pairing as the USD was hit broadly lower on growth fears following the weak manufacturing ISM. The pairing has recently bottomed at 1.3467. WTI oil prices remain inside of Wednesday's ranges, and have had little impact on the Loonie today. USD-CAD is trading under its 20-day moving average, currently at 1.3503, for the first time since December 7. A close under the level will be taken as a bearish signal.

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