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By XE Market Analysis July 24, 2020 4:19 pm
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    XE Market Analysis: Asia - Jul 24, 2020

    The DXY fell to fresh 22-month lows of 94.36 in N.Y. on Friday, marking the fifth-straight session of lower daily highs and lows. The Dollar appears to be relinquishing its role as a safe-haven currency over the past several sessions, as another risk-off session did not support the USD as had been the case for some weeks. The main driver of USD weakness has been the surge in COVID cases and hospitalizations in the U.S., which have significantly dented hopes for a V economic recovery. Traders see better economic conditions elsewhere in the world, and have been shunning the Greenback as a result. Friday saw a much better than expected new home sales report, though markets looked through the data. Wall Street sold off, while Treasury yields were narrowly mixed. EUR-USD headed from pre-open lows near 1.1580, peaking at trend highs of 1.1646. USD-JPY fell from over 106.40 to 105.58. USD-CAD chopped around inside of 1.3436 and 1.3388, while GBP-USD rallied from early lows under 1.2730 to a late high of 1.2803.

    [EUR, USD]
    EUR-USD printed new 22-month highs of 1.1646 after the London close, marking the sixth-straight session of higher daily highs and lows. The EU pandemic fund agreement seen at the beginning of the week has supported the Euro, while on the Dollar side of the equation, the surge in COVID cases in many states has sharply curtailed expectation for a U.S. V recovery, which has weighed on the Greenback through the week.

    [USD, JPY]
    USD-JPY fell to four-plus month lows of 105.68, down from 106.91 highs seen after Thursday's close. U.S./China tensions have helped the risk-sensitive Yen, though the Dollar index has fallen to 22-month lows today, down five sessions in a row. In addition, it appears the Greenback may be losing some of its safe-haven appeal, as an uncertain economic outlook weighs due to the ongoing surge in U.S. COVID cases.

    [GBP, USD]
    Cable has posted a fresh six-week high at 1.2803, drawing nearer to the June peak at 1.2814. The gain mostly reflected broader dollar weakness. Much stronger than expected preliminary July UK PMI headlines sparked a bid for pounds. Sterling. For the Pound's outlook, while Cable looks set for a return to the 1.3000 area on the back of the softening USD, we expect the currency to lag the euro and other peers. The UK and EU remain deadlocked on key issues in trade talks, and the risk is that the UK leaves the single market at year-end with either a very narrow trade deal or no deal at all

    [USD, CHF]
    EUR-CHF continued to trade on either side of its 1.0730 200-day moving average on Friday. Recent general Euro strength has provided the cross support, though resistance at 1.0800 appears to be in place for now. 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 has remained above the one-month low of 1.3349 seen on Thursday, topping at 1.3436 before easing to 1.3388 lows, then bouncing over 1.3435 in afternoon North American trade. Softer oil prices, along with risk-off trade has provided the pairing some support. WTI crude shed $1/bbl from overnight highs, trading to $40.66 lows. Given the surge in virus in the U.S., the USD now appears to be pricing in a delayed economic recovery. This should keep downward pressure on USD-CAD for now. Support comes at Thursday's low, with the June 10 base at 1.3313 the next downside target.

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