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By XE Market Analysis July 11, 2019 3:08 pm
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    XE Market Analysis: Asia - Jul 11, 2019

    The Dollar posted modest gains in N.Y. on Thursday, after being beaten lower on Wednesday by Fed chair Powell's dovish testimony. A warmer than expected U.S. CPI outcome brought USD buyers back into the fray, taking the DXY to 97.14 highs, up from 96.80 lows at the open. Treasury yields firmed up some, while Wall Street was mixed. The DJIA however, traded over the 27,000 mark for the first time ever. EUR-USD eased back from 1.1280 to a low of 1.1245, as USD-JPY peaked at 108.53 from opening lows near 108.05. USD-CAD rallied over 1.3090, while cable pulled back from 1.2170, falling back into 1.2510.

    [EUR, USD]
    EUR-USD was knocked lower following the warmer U.S. CPI outcome, falling from one-week highs of 1.1286 to 1.1245 lows after the London close. The pairing had found support on Fed rate cut speculation, and on firm German June CPI data, unwound some by the U.S. price data. Looking ahead, the Dollar is likely to remain in sell-the-rally mode ahead of the July FOMC meeting, where a 25 basis point rate cut is widely expected. EUR-USD support is now at the 50-day moving average at 1.1230, with resistance at 1.1287-95, the July 5 and July 4 highs.

    [USD, JPY]
    USD-JPY recovered from one-week lows of 107.86 seen in Asian hours, following the dovish talk from Powell on Wednesday. The Fed chair has continued to indicate a rate cut is in the cards at the end of the month, as he speaks to the Senate Banking Committee this morning. The warmer U.S. CPI, and record highs for the DJIA have helped the risk and interest rate-sensitive pairing higher, with a top so far at 108.53.

    [GBP, USD]
    Cable rallied to one week highs of 1.2570 in early N.Y. trade. The move reflected a combination of Dollar weakness and Sterling strength. A 4bp-plus rise in the 10-year Gilt yield, taking it back above the prevailing 0.75% repo rate, provided support, while fallout from Powell's dovish tone on Wednesday kept a bid in the pairingu ntil the warmer U.S. CPI outcome. From there, Cable sellers returned, as the Dollar broadly perked up, taking GBP-USD back into the 1.2510 level.

    [USD, CHF]
    EUR-CHF has put in a couple of weeks of steady, range-bound trading after dropping sharply in mid June as markets adjusted to increased prospects for the ECB to return to the dovish policy tap. The cross printed a two-year low at 1.1057 before recouping to levels around 1.1100. The advance of the Franc against the Euro will 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 last month that downside risks to the economy have increased, and that the overall policy setting "remains as expansionary as before." With the ECB increasingly under pressure to ease policy again, the SNB remains eager to counter Franc appreciation, especially against the Euro. Assuming the ECB remains on the path of further monetary policy easing, we would expect EUR-CHF retain a declining bias.

    [USD, CAD]
    USD-CAD recovered from pre-opening low near 1.3040, topping at 1.3091 at mid-morning. The warmer U.S. CPI data helped support the Greenback overall, while a modest easing of WTI crude prices weighed on the CAD to a degree. Overall though, with the Fed now in easing mode, and the BoC still maintaining a steady policy bias, USD-CAD upside will likely be contained going forward.

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