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By XE Market Analysis January 22, 2021 2:42 pm
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    XE Market Analysis: Asia - Jan 22, 2021

    FX trade was choppy on Friday, leaving the DXY gyrating in a relatively narrow range between 90.06 and 90.30. Early risk-off conditions resulted in some safe-haven USD buying, though as Stocks moved off their worst levels, the Greenback faded again. Incoming U.S. data was strong, with bot Markit PMIs and existing home sales beating estimates, though the data ultimately had little impact on the the FX market. Wall Street opened lower on concerns a Covid fiscal relief package may end up being smaller than initially thought, while the slower than hopes Covid vaccine rollout provided investor angst as well. Short covering into the weekend later saw equities pare early losses. Markets will gear up for next week's FOMC announcement on Wednesday, when no changes are expected to its uber-accommodative posture. Even though there's been an open public debate from the Committee regarding QE tapering, we don't anticipate any firm news on guidance.

    [EUR, USD]
    EUR-USD ran up to eight-session highs of 1.2190 in London morning trade, up from 1.2152 lows. From there, a bout of risk-off, saw the USD perk up some, though narrow ranges prevailed through the N.Y. session, with 1.2154 to 1.2185 containing. Weaker European PMIs did the Euro no favors, though stronger U.S. data, including PMIs and existing home sales did little to help the Greenback. EUR-USD has largely been held between its 20-day moving average, currently at 1.2197 and its 50-day moving average at 1.2099 for two-weeks now. Until a clearer picture on how economies will open up, including how large U.S. stimulus measures will be and how the Covid vaccine rollout progresses, further EUR-USD consolidation would appear to be in the cards for now.

    [USD, JPY]
    USD-JPY rallied from post-close lows of 103.49 on Thursday, topping at 103.89 in early N.Y. trade. Risk-off conditions supported the safe-haven Dollar, though as Wall Street has reversed a good bit of early losses, the pairing has been able to ease back to 103.73 lows. The pairing is back above its 20-day moving average at 103.16, after closing under the indicator on Wednesday and Thursday. USD-JPY continues to remain inside its roughly 103.00 to 104.00 trading band for over a week now, as the DXY has traded on a softer footing for the fourth day, keeping a lid on USD-JPY.

    [GBP, USD]
    Cable fell from early Asian highs of 1.3736 to 1.3636 lows in early N.Y. trade, before recovering to 1.3585 into the London close. Sterling underperformed, once again proving sensitive to risk-off conditions in global markets, which has been a frequent occurence since the start of the pandemic. The currency also extended losses on much worse than expected PMI survey data out of the UK. This saw the Pound correct from respective eight- and 32-month highs that were seen against the euro and dollar on Thursday.

    [USD, CHF]
    The SNB maintained policy settings in December and reaffirmed once again that it will use direct intervention on currency markets to keep a lid on the "highly valued" currency, despite the fact that the U.S. now official labels Switzerland as currency manipulator. There was no real surprise in the statement, with the central bank highlighting that Covid-19 is "continuing to have a strong adverse effect on the economy". The bank expects consumer prices to fall sharply this year and to stay around zero over the next two years, also thanks to a strong CHF. To start the year, EUR-CHF pulled back under the 1.0800 level, which had provided good support for much of December. The pairing remained under the 1.0800 mark through Friday's session.

    [USD, CAD]
    USD-CAD rallied from Thursday's closing low of 1.3640 to early North American high of 1.2717. The rally came as the USD rose broadly on the back of global risk-off conditions, and as oil prices fell better than 3%. Since then, better than expected Canada retail sales, and a paring of Wall Street losses has seen USD-CAD head modestly lower, so far basing at 1.2683.

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