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By XE Market Analysis July 5, 2019 1:00 pm
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    XE Market Analysis: Asia - Jul 05, 2019

    The Dollar rallied broadly in N.Y. trade on Friday, supported by a stronger June U.S. jobs report, which had the result of tamping down expectations for aggressive Fed easing. The USD was up against all major currencies through the session, taking the DXY to near three-week highs of 97.44, up from 96.90 at the open. EUR-USD fell to 1.1208 lows from near 1.1270, while USD-JPY topped at 108.62, up from lows near 108.05. USD-CAD popped to 1.3136 from 1.3055 after softer Canada jobs data, while Cable sank to six-month lows of 1.2481.

    [EUR, USD]
    EUR-USD fell to near three-week lows of 1.1208 in the aftermath of the expectation beating U.S. jobs report. The pairing had been trading near 1.1270 earlier in the session, and had found support near the 1.1260-50 level since Monday. The break of 1.1250 brought fresh sellers to bear following the data. The Euro is under its 50-day moving average of 1.1237, which now becomes resistance. With Fed easing hopes dashed to an extent following the stronger jobs data, and call for further ECB getting louder, a test of the June 18 low of 1.1181 may be in the cards next week.

    [USD, JPY]
    USD-JPY held post-jobs report gains, topping at 108.62, near three-week highs at mid-morning, and up from 108.05 ahead of the data release. Despite the soggy equity backdrop, sharply higher Treasury yields have been supportive, while the USD overall has rallied across the board, largely as the jobs report threw cold water on the scenario of aggressive Fed rate cutting. USD-JPY looks to the June 19 high of 108.67 as the next resistance level, with support now at 108.02, the 20-day moving average.

    [GBP, USD]
    Cable hit a six-month low of 1.2481 amid the post payrolls Dollar-rallying environment, seeing a similar magnitude of movement as EUR-USD and other pairings. This week's June PMI surveys laid bare the impact of both prolonged Brexit-related uncertainty and slowing economic activity in continental Europe. The June composite PMI fall sharply to 49.2 from May's 50.7, signalling economic contraction. As for Brexit, the news flow has remains quiet in terms of substantive developments. That will change as soon as the new prime minister, most likely Boris Johnson, takes up the reigns (which will be later in the month).

    [USD, CHF]
    EUR-CHF has found a footing after coming under significant pressure last week, in the wake of ECB President Draghi's eyebrow raising dovish shift, which has been the most notable of a growing chorus of dovish voices on the central bank's governing council. The cross printed a 23-month low at 1.1057 before recouping to levels around 1.1100. The advance of the Franc against the Euro will doubtlessly be displeasing to the SNB (the EUR-CHF cross being a good proxy on the Swiss currency's trade weighted value). The SNB restated at its quarterly policy review this month that downside risks to the economy have increased, and that the overall policy setting "remains as expansionary as before." The central bank also nudged its inflation forecast lower, now expecting CPI to average just 0.6% y/y this year, 0.7% in 2020, and 1.1% y/y in 2021.

    [USD, CAD]
    USD-CAD spiked to four-session highs of 1.3136 from 1.3055 in the aftermath of the stronger U.S. jobs report, and a softer than forecast Canada employment report. Relatively weaker oil prices have provided some support to the pairing as well, with WTI crude struggling to hold the $57 handle, after trading over $60 early in the week. USD-CAD resistance is now at 1.3138, Tuesday's high, with support at Thursday's 1.3037 base.

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