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By XE Market Analysis July 12, 2019 3:09 pm
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    XE Market Analysis: Asia - Jul 12, 2019

    The Dollar peaked early in the N.Y. session on Friday, reacting positively to the slightly warmer U.S. PPI outcome. From there, the USD turned modestly lower, taking the DXY from 97.08 to 96.84. Wall Street moved higher again, with major indices printing all-time highs. EUR-USD bottomed at 1.1238, later bouncing to 1.1268. USD-JPY fell from post-data highs of 108.35 to lows under 107.90. USD-CAD bounced to 1.3054 highs early on, later pulling back under 1.3030, while Cable rallied from 1.2530 to 1.2570.

    [EUR, USD]
    EUR-USD moved up to N.Y. session highs of 1.1268, coming from 1.1238 lows seen following the slightly warmer U.S. PPI data earlier. Following dovish comments from Fed chair Powell this week, EUR-USD downside potential is liable to be limited, especially given the latest market talk of the ECB holding back from further stimulus until the Fed likely pulls the trigger on a 25 basis point rate cut at the end of July. For now, the 50-day moving average at 1.1241 should provide support.

    [USD, JPY]
    USD-JPY was back under the 108.00 mark, bottoming under 107.95, and back under its 20-day moving average of 108.02. Solid EUR-JPY selling was reported, with that cross down to eight-session lows near 121.50, falling from 122.10 at the open, and putting downward pressure on USD-JPY. Next support is at Thursday's 107.86 low, though Wall Street gains and firmed Treasury yields should limit downside into the close.

    [GBP, USD]
    Cable settled near 1.2570 in light Friday afternoon trade, a one-week peak, which extended the rebound from the trend low seen earlier in the week at 1.2439. We wouldn't advise trend following GBP gains given the evident impact that prolonged Brexit uncertainty and increased risk of a no-deal exit from the EU have been wielding on the UK economy. GBP-USD has support at 1.2510-12.

    [USD, CHF]
    EUR-CHF traded to a July low 1.1072 in N.Y. on Friday. The cross printed a two-year low at 1.1057 before recouping to levels around 1.1100 back in June. 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 modestly from the near nine-month low of 1.3018 seen in London morning trade, edging to 1.3054 highs at mid-morning. The low came in concert with the overnight highs for WTI crude, though with oil prices dipping under the $60 mark, and the weekend approaching, short-covering interest has taken over. Looking ahead, with the Fed on track for rate cuts, and the BoC seen on hold for the foreseeable future, further USD-CAD gains will likely be limited.

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