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By XE Market Analysis January 16, 2020 2:54 pm
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    XE Market Analysis: Asia - Jan 16, 2020

    The Dollar gained in N.Y. trade on Thursday, supported by better than expected incoming U.S. data. Retail sales, jobless claims, and the Philly Fed index all beat consensus forecasts. Wall Street surged to fresh record highs, while Treasury yields edged higher. The DXY recovered from seven session lows of 97.08 seen ahead of the open, later topping at 97.36. EUR-USD fell from 1.1172 to 1.1128, while USD-JPY topped at 110.18, up from early lows of 109.93. USD-CAD was range bound, peaking at 1.3056. Cable meanwhile, fell to 1.3032 from near 1.3075, though later recovered to over 1.3080.

    [EUR, USD]
    EUR-USD succumbed to selling pressure following the better than expected data releases early in the session, dropping from seven-session highs of 1.1172 to a 1.1128 low into the London close. The approximate 1.1100 to 1.1200 trading range has been in place for a week now, though an outperforming U.S. economy versus Europe, along with the Dollar's interest rate advantage should continue to put a cap on the Euro.

    [USD, JPY]
    USD-JPY held firm firm, trading above the 119 mark, peaking at 110.18, and within reach of the seven-plus month high of 110.22 seen on Tuesday. Solid risk-on conditions, along with firmer Treasury yields have supported, though Japan exporter backed selling, along with spec related profit taking have so far put a cap on the pairing. Buy -stops are rumored at 110.25, with the next upside target from there being the May 23, 2019 high of 110.38.

    [GBP, USD]
    Sterling has become less volatile in recent sessions after a one-month phase of heightened choppiness following the UK election result and in thin markets over the Christmas and new year holiday period. Cable bottomed at 1.3032 following stronger U.S. data, later rallying to 1.3083 highs. We are taking a neutral-to-bearish view of Sterling amid concerns about the durability of any post-election economic bounce, with Brexit issues likely to remain a concern. The upcoming BoE Monetary Policy Meeting, on January 30, is now a live meeting. The BoE-sensitive 2-year Gilt yield had dropped by nearly 20 bp over the last week, with futures indicating a better than 50% chance of a 25 bp rate cut.

    [USD, CHF]
    EUR-CHF extended recent losses to a fresh 33-month low at 1.0732. This is the sixth week out of the last seven that the cross has declined, with losses accelerating this week. The reason for the divergence in the two main currency safe-haven currencies, the yen and the franc, is the U.S. Treasury having added Switzerland to its list of currency manipulators this week. This seems a bit rich given the franc is a demonstrably chronically overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index). The U.S. argues that Switzerland needs a more expansive fiscal policy. The CHF-JPY cross is now trading at 13-month highs after rallying by almost 5% from levels seen in late November

    [USD, CAD]
    USD-CAD has turned sideways, managing just a 1.3056 to 1.3031 trading range since Wednesday's North American close. Firmed up oil prices and risk-on conditions have kept the pairing under some pressure, though consolidation appears to be in place ahead of next week's domestic events, which include manufacturing and CPI data, along with the BoC policy meeting. A band of 1.3000 to 1.3100 is expected to hold until then.

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