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By XE Market Analysis January 9, 2020 3:13 pm
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    XE Market Analysis: Asia - Jan 09, 2020

    The Dollar rallied again on Thursday, so far this year bouncing from steep year-end losses seen last month. The U.S. economic outlook, along with the USD interest rate differential advantage has been a driver of USD strength so far in 2020. Looking ahead, economics, geopolitics and later, the U.S. presidential election in November will impact Dollar direction going forward. Today's session saw EUR-USD drop to two-week lows of 1.1093 from early highs of 1.1118. USD-JPY topped at 109.58 from 109.33 at the open, while USD-CAD rallied over 1.3100 as oil prices fell further. GBP-USD based at 1.3014.

    [EUR, USD]
    EUR-USD was down for the third straight session, touching two-week lows of 1.1093 before bouncing slightly over 1.1110. U.S. economic outperformance relative to Europe, along with the USD's yields advantage, should keep EUR-USD gains contained for the time being. The low on December 20 at 1.1065 is the next support/target level, with the 200-day moving average at 1.1141 providing resistance.

    [USD, JPY]
    USD-JPY headed to two-week highs of 109.58, up from 109.33 lows at the open, and 109.01 lows seen during the overnight session in Asia. Another risk-on session brought in buyers, with both Wall Street and Treasury yields higher on the day. Strong resistance is expected at 109.72-73, representing the highs from December 13 and December 2, respectively. A break above there takes the pairing to levels last seen in late May, 2019.

    [GBP, USD]
    Cable printed two-week lows of 1.3014 into the N.Y. open, after dropping quite sharply on dovish-leaning remarks from BoE's Carney during the London morning session. The pairing later topped near 1.3070. Meanwhile, on the Brexit front, the Withdrawal Agreement Bill is set to comfortably pass the remaining stages in House of Commons votes today before passing to the House of Lords. Once passed in the Lords, which is expected, the bill will then pass on for royal assent, a formality where the Queen signs it into law. This will set Brexit up for January 31. UK prime minister Johnson met with European Commission chief von de Leyen late yesterday, which produced a lot platitudes about mutual respective, common ground, etc, as the two sides commence talks about a new trading relationship. Before their meeting, Von de Leyen had made clear that a comprehensive agreement would be "impossible" in the 11-month time frame Johnson has set, which should keep a cap the pound's upside potential.

    [USD, CHF]
    EUR-CHF held above the 30-plus month lows of 1.0782 seen on Wednesday after Iran's missile strike on U.S. bases in Iraq. The cross managed a 1.0811 highs, as geopolitical fears faded some. The selling on Wednesday was driven by the Franc's safe-haven status, coming on the back of geopolitical fears in the mid-east. Later, as Trump said it appears Iran is "standing down", the cross headed up to 1.0824 highs.

    [USD, CAD]
    USD-CAD has rallied to two-week highs of 1.3105, up from overnight lows of 1.3024. Gains have come on the back of further oil prices losses. WTI crude lost another 1.5% today, bringing the total losses to 10% from highs seen following the Iran missile attack in Iraq. From here, we look for consolidation ahead of Friday's twin U.S./Canada employment reports.

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