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By XE Market Analysis July 10, 2020 2:56 pm
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    XE Market Analysis: Asia - Jul 10, 2020

    The Dollar traded lower through the morning session, as risk taking levels improved following positive news on COVID vaccine development, as Pfizer and BioNTech said a COVID vaccine will be ready by December. In addition, a new study on Remdesivir indicated the drug reduced virus death risk by 62%. The USD ticked higher in afternoon dealings, with the modest move up credited to pre-weekend short covering. June PPI data was cooler than expected, though had little impact on the market. The good virus news saw Wall Street head higher, though the NASDAQ took a breather from its record gains, trading on either side of flat through the session. Treasury yields headed a little higher as well. EUR-USD moved from early lows of 1.1274 to 1.1325, later settling near 1.1300. USD-JPY dipped from 106.89 to 106.65, ending near 106.90. USD-CAD fell to 1.3574 from near 1.3610, later rallying to 1.3626. Cable meanwhile, opened at 1.2586, making its way to 1.2664 into the London close, then settling near 1.2630.

    [EUR, USD]
    EUR-USD rallied from opening lows of 1.1274, later peaking at 1.1325. The pairing had touched one-week lows of 1.1255 in London morning trade. An improved risk backdrop, which came on positive COVID vaccine news weighed on the safe-haven USD, though pre-weekend position squaring has seen the Euro pull back toward 1.1300 into the London close. Risk levels continue to drive Dollar direction, as economic fundamentals, at this juncture at least, are largely ignored.

    [USD, JPY]
    USD-JPY broke out of its recent trading band, falling to near three-week lows of 106.65, down from overnight highs of 107.26. Losses overnight came ass risk appetite dropped, resulting in safe-haven Yen buying this time around. The Dollar since has pulled back overall, as risk appetite returned, following positive COVID vaccine news. USD-JPY later recovered to 106.95 highs. Support now comes at the June 24 low of 106.38, with resistance at 107.22, representing the 20-day moving average.

    [GBP, USD]
    Cable traded up to 1.2664 in N.Y., up from opening lows of 1.2586. GBP-USD ended up on the week, though we are not too confident that the pound will continue higher next week. The government's extra GBP 30 bln for the fiscal pot, which brings the total crisis-response fund to GBP 160 bln, was largely as expected, and is now priced in markets. Trade negotiations between the UK and EU ended early on Thursday for a second consecutive week due to "significant differences," as EU chief negotiator Barnier put it. This is a disappointment after a parliamentary transcript came to light earlier this week of a meeting between the Lords Select Committee and Barnier, which hinted that the EU may be contemplating a compromise on its fisheries position.

    [USD, CHF]
    EUR-CHF was again range bound in N.Y. on Friday, trading in the lower to mid-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 fell to intra day lows of 1.3574 after the huge Canada jobs gains in June. That, along with a recent rebound in oil prices supported the CAD through the morning. The pairing earlier topped at a near two-week high of 1.3632. The pairing later headed over 1.3625 on noted short covering. USD-CAD direction has largely been driven by a combination of oil prices and risk taking levels, and more of the same can be expected looking forward, as economic fundamentals remain difficult to estimate in light of the virus backdrop.

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