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By XE Market Analysis July 6, 2020 2:20 pm
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    XE Market Analysis: Asia - Jul 06, 2020

    The DXY fell to nearly two-week lows of 96.57 in early N.Y. trade on Monday, down from 97.19 highs seen in early Asia. Global risk-on conditions, driven by Chinese state media's more positive view on a domestic recovery, further underpinned sentiment following the robust U.S. jobs report on Thursday. Also, the initial rebound from lockdowns is looking stronger and faster than expected. Wall Street and Treasury Yields were higher as well. These factors resulted in some unwinding of USD safe-haven flows. Conditions reversed following the much better June services ISM, the result taking the Greenback broadly higher. EUR-USD rallied from near 1.1300 at the open, later peaking at 1.1345 before falling back toward 1.1300 again. USD-JPY was range bound, peaking at 108.60, with a low of 107.41. USD-CAD ranged between 1.3528 and 1.3553, while Cable dropped from 1.2520 to 1.2481.

    [EUR, USD]
    EUR-USD made its way higher through much of the overnight session, rallying from lows near 1.1280 into the open, later peaking at 1.1345 into the services ISM release. Risk-on conditions had resulted in the unwinding of USD safe-haven flows, though the huge ISM beat resulted in some Dollar short covering, allowing EUR-USD to retreat to 1.1302 lows. As long as risk-taking levels remain positive, EUR-USD risk will remained tilted to the downside.

    [USD, JPY]
    USD-JPY headed to 107.78 during the Asian session after opening under 107.50. Risk-on conditions saw the Yen underperform, though the market switched gears after the London open, resulting in USD-JPY to drift lower through the morning session, falling to intra day lows of 107.41 in early N.Y. The unwinding of safe-haven Dollar flows was noted in U.S. trade, seeing the USD head lower versus most of its counterparts. Major USD-JPY support comes at the 200-day moving average at 107.40.

    [GBP, USD]
    Cable posted a four-day high at 1.2520 in early N.Y, up from London lows of 1.2476. Gains didn't hold hoever, as the Dollar rebounded on the sharp rise in the U.S. services ISM. Cable later fell back to 1.2480. May and June data out of the UK, including June construction PMI, have been indicating a strong rebound from the April nadir, when the coronavirus lockdown measures were in full force. However, the path ahead looks to be a rocky onee, as new lockdown measures being re-introduced in Leicester, due to a spike in coronavirus cases there, is an ominous sign of the challenges being faced as the UK reopens, especially with social distancing rules having been relaxed and with pubs and restaurants reopening.

    [USD, CHF]
    EUR-CHF was again range bound in N.Y. on Monday, trading in the lower to min-1.06s for a week now. The cross had fallen back over the last few of weeks, though has continued to trade comfortably above the series of lows near 1.0500 that were seen from March through to mid May. Committed SNB intervention prevented the 1.0500 level from being breached over this period. SNB policy, which stuck with negative rates for the foreseeable future and strengthened its commitment to intensify FX intervention if necessary to keep the CHF under control.

    [USD, CAD]
    USD-CAD touched a two-week low of 1.3518 overnight, in concert with WTI printing its high of the day at $41.08. The pairing later bounced to 1.3561 highs, as crude prices head under $40.30. The risk-on conditions seen this morning should limit USD-CAD upside going forward. Major support comes at the 200-day moving average at 1.3496, with resistance at the 20-day moving average, currently at 1.3572.

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