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By XE Market Analysis July 30, 2020 2:58 pm
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    XE Market Analysis: Asia - Jul 30, 2020

    The DXY printed fresh two-year lows in N.Y. on Thursday, printing a base of 93.04, after opening at 93.61. The plunge in Q2 GDP, along with the rise in both initial jobless claims and continuing claims dented sentiment overall, seeing stock slide, and Treasury yields fall to record lows. The USD was impacted by the data, though continues to suffer from the lowering of expectations for the U.S. economic outlook. As the FOMC said on Wednesday, the ongoing pandemic "will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term." Further Dollar losses can be expected. EUR-USD climbed from 1.1750 to trend highs of 1.1832, as USD-JPY fell from 105.28 to 104.81. USD-CAD bottomed at 1.3394, later peaking near 1.3450. GBP-USD made trend highs of 1.3087, up from opening lows of 1.3006.

    [EUR, USD]
    EUR-USD printed a 25-month high of 1.1832 after the London close, up from opening lows at 1.1743. The Dollar remains under severe pressure, as the DXY has made fresh trend lows nine of the last ten reading sessions. Economic uncertainty related to COVID has weighed on the USD, as cases continue to climb, while the EU pandemic recovery fund has supported the Euro. The next upside target is the June 2018 high of 1.1853.

    [USD, JPY]
    USD-JPY bottomed at 104.92 in the aftermath of the U.S. data and crumbling equities, down from early highs of 105.28, though above Wednesday's near five-month low of 104.76. The pairing later bounced to 105.18 highs, with the modest move higher coming as Wall Street pared some losses. Gains were not to last however, as the pairing fell back to 104.81 after the London close. The outlook remains uncertain for the USD, as the fate of the stimulus package up in the air, and the COVID spikes crimping the economic recovery picture. The Dollar appears to have lost its safe haven appeal of late, and as a result, USD-JPY should have further downside potential should risk-off continue.

    [GBP, USD]
    The Pound continued its outperforming streak, showing a better than 0.5% average gain versus the Dollar in N.Y. on Thursday. There has also been signs that have led markets to factor improved odds for a EU-UK trade deal, with a number of sourced press reports suggesting that discussions are going better than the official line suggests. We see scope for Cable returning to levels around the 1.3500 mark should this be the case.

    [USD, CHF]
    EUR-CHF retreated to the mid-1.07s in N.Y. on Wednesday, after topping at 1.0841 on Monday. The cross continues to be supported however, by broad outperformance of the Euro 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 continues 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.

    [USD, CAD]
    USD-CAD rallied to seven-session highs of 1.3458, up from North American lows of 1.3394. The move higher came as oil prices took a tumble, with WTI crude falling as much as 5% to under $39.00/bbl. Also supportive of the pairing was the sharp risk-off backdrop, which came following the rise in U.S. jobless claims and continuing claims. The pairing later dipped back to 1.34.14 USD-CAD resistance is now at the July 22 high of 1.3484, followed by the 20-day moving average at 1.3501.

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