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By XE Market Analysis July 15, 2020 2:04 pm
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    XE Market Analysis: Asia - Jul 15, 2020

    The Dollar was under some pressure early in the session on Wednesday, taking the DXY to one-month lows of 95.78. The USD's weakness was again attributed to the risk-on backdrop, which saw stocks and yields head higher, prompting the unwinding of safe-haven long USD positions. The surge in risk-taking came following news that Moderna's experimental COVID vaccine looks promising. Later, as stocks pared gains on the ramping up of U.S./China tensions, the dollar regained some ground, taking the DXY back to 96.11 highs. Incoming U.S. data was ultimately supportive of the Greenback as well, as the Empire State index and industrial production both beat forecasts. EUR-USD topped at 1.1452, later easing to 1.1402 lows. USD-JPY opened near 106.95 before dipping to 106.66 lows, later recovering toward 107.00. USD-CAD revealed little reaction to the as-expected no-change BoC policy outcome, though made its way to 1.3503 lows into the close from 1.3587 highs. GBP-USD topped at 1.2650, and spent the afternoon retracing to 1.2576 lows.

    [EUR, USD]
    EUR-USD printed four-month highs of 1.1452 in early trade, since pulling back to 1.1412 lows, with profit taking reportedly behind the dip lower. Today's risk-on backdrop has weighed on the Dollar, while the Euro has been supported by expectations on an agreement on the proposed EUR 750 bln pandemic recovery fund that EU heads of states will be discussing at the summit that starts on Friday.

    [USD, JPY]
    USD-JPY was range bound through the session, managing just a 107.43 to 107.17 trading band since the open. A mixed risk backdrop has seen the pairing put in its narrowest range in quite a while, and more of the same can be expected until a clearer picture of the pandemic and the economy can be gleaned. For now, resistance is at the 50-day moving average, currently at 107.44, with support at the overnight Asian low of 107.12.

    [GBP, USD]
    Cable topped at 1.2650 in early N.Y. trade, turning lower from there, later bottoming under 1.2580. UK June inflation data showed headline CPI lifting to 0.6% y/y from 0.5% y/y. This was slightly warmer than expected. While CPI remains well below the BoE's 2.0% target, the data may at the least provide a counter to arguments on the Monetary Policy Committee for negative interest rates. From here, we anticipate only limited upside potential for the pound, with risks seen as remaining skewed to the downside given the risk that trade discussions between the UK and EU continue without breakthrough.

    [USD, CHF]
    EUR-CHF rallied to three-week highs of 1.0790 on Wednesday, finding fresh buyers on the move over the 200-day moving average at 1.0738. Another risk-on session, and general Euro strength helped the cross higher as well. The pairing 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 slipped from near 1.3620 seen after Tuesday's close, to 1.3560 lows into the North American open. Firmer oil prices and risk-on conditions weighed, though the pairing steadied into the BoC policy decision at 10:00 ET. USD-CAD dipped to 1.3561 from near 1.3580, then topped over 1.3585 in the aftermath of the BoC announcement, where no policy changes were made, as expected. The statement said "The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In addition, to reinforce this commitment and keep interest rates low across the yield curve, the Bank is continuing its large-scale asset purchase program at a pace of at least $5 billion per week of Government of Canada bonds." From there, USD-CAD made its way down to 1.3503 lows.

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