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By XE Market Analysis July 30, 2019 3:03 pm
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    XE Market Analysis: Asia - Jul 30, 2019

    The Dollar advanced slightly through the N.Y. morning session on Tuesday, taking its cue from better U.S. personal earnings, consumption and confidence data. The Greenback eased back slightly after the London close, with position squaring interest noted ahead of Wednesday's FOMC announcement. A 25 basis point cut is widely expected, though with the Fed likely not to be as dovish tilting as the market wants, we see upside risk for the Dollar. EUR-USD moved between opening highs of 1.1159, later touching 1.1154 lows. USD-JPY meanwhile, climbed from 108.45 to 108.70 highs. USD-CAD peaked at 1.3192, later falling back under 1.3160 on firmed oil prices. Cable meanwhile, attempted to consolidate recent sharp losses, though managed highs of just 1.2190 into the open, after hitting trend lows of 1.2119 overnight in Asia.

    [EUR, USD]
    EUR-USD was range bound in N.Y. trade on Tuesday, opening at session highs of 1.1159, later slipping to 1.1138 lows, then steadying near 1.1150. The pairing moved to session lows following stronger U.S. earnings, consumption and confidence data, though based on the timing, it appeared London names covered shorts into their close, and ahead of Wednesday's key FOMC announcement. We expect recent ranges to hold up overnight, though see risk for market disappointment from the Fed. A less dovish than anticipated statement and Powell press conference could well see EUR-USD test the two-plus year lows of 1.1102 seen last week.

    [USD, JPY]
    USD-JPY has held up well through the session, peaking at 108.70 into the London close. . Stronger incoming U.S. data provided support this morning, despite a weaker Wall Street, though with U.S./China trade issues back in the spotlight, the risk-sensitive Yen may not have much more room to fall. A less dovish than expected BoJ last night gave USD-JPY buyers a bit of pause, leaving the July 10 high of 108.99 in place as solid resistance, with a break likely to result in follow through stop loss buying.

    [GBP, USD]
    Sterling saw a consolidation of losses on Tuesday, with the beleaguered currency nestled moderately up on the fresh major-trend lows seen during the London AM session. Cable printed a fresh 28-month low at 1.2119, and EUR-GBP a 22-month high at 0.9190. There is potential for a sharp short-squeeze positioning rebound, given the large net short exposure to the Pound, but there seems little scope for a sustained recovery while the new UK prime minister remains steadfast in his rejection of the Irish backstop, and pledge to leave the EU free trade area, while Brussels remains steadfast in its conviction that there can be no deal without the Irish backstop.October 31.

    [USD, CHF]
    UR-CHF has settled after rebounding with gusto last week after the ECB refrained from hitting the rate-cut button on Thursday. The cross, which is sensitive to ECB policy, sprang to a recovery high of 1.1063 from a 24-month low at 1.0962. We still anticipate EUR-CHF to remain biased lower as the ECB shifted to an explicit easing bias, laying the groundwork for a comprehensive set of easing measures in September. The risk of a disorderly no-deal Brexit on October 31 is also in the mix, which is a bearish factor for the cross.

    [USD, CAD]
    USD-CAD has remained firm through the morning session, despite higher WTI oil prices, topping at 1.3192 early in the session. Trump's early tweet criticizing China and its trade policies (even as U.S. negotiators sit down in China to discuss trade) appeared to underpin USD-CAD, as negative trade news generally weighs on the CAD. Meanwhile, the USD overall remains near the two-month highs seen overnight, providing additional support to USD-CAD. Friday's 1.3199 high is resistance, with support at Monday's 1.3149 low.

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