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By XE Market Analysis July 16, 2019 1:44 pm
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    XE Market Analysis: Asia - Jul 16, 2019

    Better than expected U.S. retail sales helped Dollar sentiment in N.Y. on Tuesday, with the DXY printing one-week highs of 97.36. Better earnings from the likes of Goldman Sachs, JP Morgan, and Wells Fargo did little to lift Wall Street, as major indices remained on either side of flat for much of the session. Treasury yields moved higher as well, also supportive of the USD. EUR-USD dipped to five-session lows of 1.1208. USD-JPY managed a 108.35 high, up from 107.90 levels at the open. USD-CAD idled inside of a 1.3025-50 trading band, while Cable printed new trend lows of 1.2397. Later, comments from Powell, speaking in Paris kept a 25 basis point rate cut on the table at the FOMC meeting at the end of July.

    [EUR, USD]
    EUR-USD continues to trickle lower, bottoming so far at 1.1208, after opening near 1.1225. The U.S. retail sales data helped Dollar sentiment, while ahead of the U.S. session, weak German ZEW confidence figures dropped, weighing on the Euro. The ZEW institute said "the continued negative trend in incoming orders in the German industry is likely to have reinforced the financial market experts' pessimistic sentiment". The pairing is well below its 50-day moving average at 1.1243 now, which will provide some resistance, and is within range of last week's July low of 1.1193.

    [USD, JPY]
    USD-JPY has added to the post-data rally, topping over 108.30, and up from opening lows of 107.92. The stronger retail sales outcome, along with accompanying firmer Treasury yields supported the pairing through the morning session. Wall Street was narrowly mixed from the open, which had little impact on the risk-sensitive Yen. USD-JPY support now comes at 107.98, the 20-day moving average, with resistance at 108.69, the 50-day moving average.

    [GBP, USD]
    Cable hit a fresh trend lows of 1.2397, partly on dollar strength and partly on sterling weakness. Higher than expected UK average income data was offset by a jump higher in jobless claims, while Brexit-related uncertainty, along with associated political developments that have increased the odds for a no-deal exit scenario, continue to preoccupy the market mindset with regard to sterling. The UK will have a new prime minister next week, with the Conservative Party's leadership party concluding next Tuesday. Boris Johnson is more than likely to succeed.

    [USD, CHF]
    EUR-CHF traded to a two-year low of 1.1056 in N.Y. on Monday. Weak Germany ZEW figures weighed on the Euro, helping the cross lower. 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 moved up to three-session highs of 1.3064 in London morning trade, up from Monday lows near 1.3020. Oil price movements and general USD strength provided support most recently. WTI crude is off its recent highs, while the DXY printed one-week highs into the N.Y. open. We look for some consolidation to set in ahead of key Canada CPI and manufacturing data on Wednesday. We expect headline CPI to cool in June, likely leaving a 1.8% y/y outcome. cooler than the 2.4 y/y clip seen in May.

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