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By XE Market Analysis July 16, 2020 3:06 pm
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    XE Market Analysis: Asia - Jul 16, 2020

    The Dollar turned mostly lower through the N.Y. morning session on Thursday, though recovered in afternoon trade. The DXY dropped from 96.18 to 95.90 lows, then bounced to intra day highs of 96.32. Incoming U.S. data was mixed, seeing strong retail sales, though a very slow rate of decline in jobless claims, plus erosion in the six-month component of the Philly Fed index had the market fearing a slowing in the economic recovery may be ahead. Wall Street and yields were lower. The USD sold off some after the data, though heightened COVID concerns resulted in save-haven buying through the afternoon. EUR-USD hit morning lows of 1.140 in morning trade, rallied to 1.1442, then fell to lows under 1.1380 into the close. USD-JPY was steady above 107.00 through the morning, later rallying over 107.35. USD-CAD bottomed at 1.3508 before heading to 1.3570 highs. GBP-USD printed an inverted V, opening near 1.2550, rallying to 1.2624, then falling back to 1.2550.

    [EUR, USD]
    EUR-USD rallied through the N.Y. morning session, peaking at 1.1442 before easing back under 1.1380 lows after the London close. ECB's Lagarde, at her press conference on Thursday, said that ample liquidity is still needed, but no need for more at the moment. Lagarde's statement confirmed that the central bank is now in wait and see mode. This likely helped the Euro move up to highs from the 1.1379 lows ahead of the presser. The pairing failed to take out Wednesday's four-month high at 1.1452 though, which may have prompted a light round of position squaring. In addition, risk-off conditions saw some Dollar demand return in afternoon dealings

    [USD, JPY]
    USD-JPY had been on the rise through the London session, heading from 106.86 lows to 107.21 early in N.Y. trade. Risk-off conditions were the driver behind the modest rally, as equities slipped and bonds headed higher. Since then, Wall Street pared losses, allowing USD-JPY to slip back to 107.06 lows, though USD demand returned later in the session, seeing USD-JPY Hit 107.30. Bigger picture, USD-JPY remains rangebound overall, plying about at 106.50 to 107.50 trading band for a week now. Support is at 106.64, the July 10 low, with resistance at 107.47, representing the 50-day moving average.

    [GBP, USD]
    Cable rallied through the morning session, taking EUR-USD's lead, topping at 1.2624, later falling back under 1.2550. The pairing printed a two-day low at 1.2520 ahead of the open earlier. UK June labor data showed a partial rebound following the significant lockdown contraction; not a startling revelation to markets. From here, we anticipate only limited upside potential for the pound, given the risk that trade discussions between the UK and EU continue without break through.

    [USD, CHF]
    EUR-CHF retreated from one-month highs of 108.05 in N.Y. on Thursday, rallied to three-week highs of 1.0790 on Wednesday, pulling back to 1.0747 lows. The risk-off session weighed, through the Euro's afternoon general decline was behind most of the move. The pairing had fallen back over the last few 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 traded to one-week lows of 1.3500 overnight, dipping briefly under its 200-day moving average which sits at 1.3507. Buyers stepped in under the level, resulting in a bounce to 1.354 early in the session. Also supportive of the pairing was a return to moderate risk-off conditions, and a dip in WT crude oil prices. USD-CAD headed to highs of 1.3570 in afternoon trade, as oil prices dipped, and as safe-haven USD demand returned. A close above the 200-dma may result in follow through buying overnight.

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