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By XE Market Analysis January 22, 2019 2:54 pm
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    XE Market Analysis: Asia - Jan 22, 2019

    The dollar rallied early in the N.Y. session on Tuesday, though was batted down following weak U.S. housing data, and a sharp Wall Street sell off. Global growth concerns drove equities following softer China GDP and an IMF growth downgrade. EUR-USD bottomed at 1.1336 early on, before peaking at 1.1374. USD-JPY opened near 109.40, later falling to 109.14 lows. USD-CAD rallied to 1.3355 highs on weaker oil prices, while cable topped over 1.2970.

    [EUR, USD]
    EUR-USD touched near three-week lows of 1.1336 early in the session, after opening around 1.1360. General Dollar strength weighed, along with disappointing German ZEW components, released earlier. The Euro has since bounced toward 1.1375, with the latest tick higher coming following soft U.S. exiting home sales. The pairing remains under its 50-day moving average, currently at 1.1387, where sellers are expected to return.

    [USD, JPY]
    USD-JPY fell to intra day lows of 109.28 after the weaker U.S. housing data, though later recovered to 109.47 highs. Buying from the lows reportedly came from over $500 mln worth of 109.25 options, which expired at 10:00 ET. Upside will likely be contained near term however, as risk-off sentiment remains a supportive factor for the Yen. Japan's BoJ policy announcement is due tonight, though no changes are expected either in terms of rates or guidance. The Bank will not have been pleased with the sharp cooling in the national CPI reported last week, and indeed the Outlook Report is likely to see a downgrade to growth and inflation forecasts. The December trade report is expected to see the deficit narrow to JPY 50.0 bln from 737.7 bln previously.

    [GBP, USD]
    The pound jumped on the UK jobs release, with Cable rising from levels near 1.2890 to a high of 1.2928 before pulling back into the N.Y. open. The pairing topped over 1.2970 in N.Y. trade, rising from lows near 1.2890. On the Brexit front, the UK's parliament will vote on a modified version of Prime Minister May's Withdrawal Agreement next Tuesday, January 29. Much will depend on whether Prime Minister May can win concessions from the EU on the Irish backstop, in the hope that this would win the support (and votes) of Northern Ireland's DUP and the hard Brexiteer faction in her Conservative Party. It doesn't look likely, but there are pundits suggesting that the EU might be amenable to making a change.

    [USD, CHF]
    EUR-CHF has ebbed back to the lower 1.1300s after carving out a one-month high yesterday at 1.1347. USD-CHF is also softer after also trading at one-month highs. Recent underperformance of the Swiss franc has been accompanied by talk/suspicions of SNB intervention. SNB vice president, Zurbruegg, said that "the uncertainties concerning further developments (the world economy) have increased recently", and said that Swiss growth is expected to slow this year. He added that "the franc remains highly valued" and the situation on foreign currency markets is "still fragile." He also said that the SNB's two pillar strategy that focuses on negative interest rates and the threat of ad-hoc currency interventions "remains appropriate."

    [USD, CAD]
    USD-CAD rallied to better than two-week highs of 1.3355 following weaker than expected Canada manufacturing data, coming from overnight lows of near 1.3295. Aside from the data, a 2% drop in WTI crude prices has supported the pairing. Resistance now comes in at 1.3359, which represents the 50-day moving average.

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