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By XE Market Analysis July 27, 2020 2:53 pm
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    XE Market Analysis: Asia - Jul 27, 2020

    The DXY fell to two-year lows of 93.48 in N.Y. on Monday, down from 94.40 highs seen in Asian hours. Incoming data has the June durables report, where order rose a better than consensus 7.3%. As has been the case of late, there was little if any market reaction. Wall Street made headway, led by the NASDAQ as the agreement between the White House and GOP lawmakers tempers the uncertainty over the ability to deliver another spending bill. The rising number of new virus infections and U.S.-China trade frictions remain a damper on risk appetite, but the now solid chance for another shot of fiscal stimulus before month-end lifted sentiment, at least for now. EUR-USD headed from near 1.1680 into the open, to 1.1782 highs. USD-JPY peaked at 105.49 early, later hitting lows of 105.12. USD-CAD hit a 1.3404 high, later bottoming under 1.3355. Cable made trend highs of 1.2902, climbing from early lows of 1.2842.

    [EUR, USD]
    EUR-USD printed 23-month highs of 1.1782 printing seven-consecutive sessions of higher daily highs and lows. The combination of Euro strength following the agreement on the EU coronavirus relief fund, and USD weakness, as COVID continues to spread in the U.S. have been the drivers of EUR-USD gains. A Reuters survey last week highlighted increasing pessimism about the nearer-term U.S. outlook given the extent of localized lockdown measures in response to the spike in coronavirus cases across many southern and western states. Downside risks for EUR-USD include less dovish than expected Fed guidance this Wednesday, when the FOMC policy announcement is due.

    [USD, JPY]
    USD-JPY hit new four-month lows of 105.12, down from 106.06 Asian highs. The Dollar overall has been getting slammed of late, seeing the DXY fall to two-year lows. The move lower has come as the USD has largely given up its safe-haven role, as investors come to the realization that as a result of spiking COVID cases, economic recovery in the U.S. will likely not come in the form of a V. The next support level comes at the March 13 low of 104.50.

    [GBP, USD]
    Cable posted a near five-month peak at 1.2902 on the back of dollar weakness. The pound's laggard performance comes amid increasing signs that the EU and UK are only likely to strike a narrow trade deal, with the risk remaining that the UK might even leave the single market at year-end without a deal. The final round of EU-UK trade talks before the summer break will take place this week in London. Last week's round in Brussels ended without breakthrough, with both sides reporting that major differences remain on key issues, particularly level playing field rules and fisheries. The UK calendar this week is relatively quiet, highlighted by latest CBI distributive sales report (Tuesday), June lending and money support figures from the BoE (Wednesday), and the July GFK consumer sentiment survey (Friday).

    [USD, CHF]
    EUR-CHF rallied to better than one-month highs of 1.0839 in N.Y. on Monday, reflecting broad outperformance of the common currency and, possibly, the added influence of the SNB's intervening hand. Weekly sight deposit figures out of Switzerland suggest that the central bank has been continuing to sell francs regularly, as it has been since the consequences of the pandemic took a grip on markets, which had the impact of increasing demand for the Swiss currency, back in March. Recent general Euro strength has provided the cross support. 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 remained above last week's one-plus month low of 1.3349, trading under 1.3355 lows during the North American afternoon session. The pairing bottomed at 1.3369 into the open, after peaking at 1.3431 in early Asian dealings. Broad USD weakness limited upside for USD-CAD, as the uncertain U.S. economic outlook has seen the Greenback's safe-haven status erode, while WTI crude prices bounced over $41.80 also put a cap on the pairing.

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