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By XE Market Analysis June 2, 2020 2:33 pm
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    XE Market Analysis: Asia - Jun 02, 2020

    The Dollar index hit new near two-month low of 97.43 into the N.Y. open, down from overnight highs of 97.91. Tuesday marked the sixth-consecutive lower daily low. After starting the session on a weaker footing, the USD made up some ground through the morning. EUR-USD printed trend highs of 1.1195, after opening at 1.1155. USD-JPY bucked the trend, braking out of its recent trading range, topping at 108.77, after opening near 107.90. USD-CAD fell to trend lows of 1.3482, while Cable hit a one-month high of 1.2576. Wednesday's U.S. calendar will be of interest, and has the May ADP employment survey, where we expect private payrolls to fall 2.100 mln, versus the 20.236 mln drop in April. April factory orders should fall 15.0%, after dropping 10.4% in March. The May non-manufacturing ISM should improve to 46.0 from 41.8.

    [EUR, USD]
    EUR-USD topped at 1.1196, levels last seen on March 17. The pairing ran up from London morning lows of 1.1115, as hopes for global economic recovery remain positive. Optimism has dented the Dollar broadly, as demand for the safe-haven currency wanes. EUR-USD has put in six-straight sessions of higher daily highs and lows, though given the backdrop of uncertainty over the course the pandemic takes going forward and U.S./China tensions, the Euro may not be a one-way move higher from here. The Dollar will revert to a safety currency should economic hopes fizzle, and should the virus re-emerge in the coming weeks as people return from lock downs. EUR-USD resistance is at the psych 1.1200 level.

    [USD, JPY]
    USD-JPY broke higher in N.Y. trade on Tuesday, touching a near two-month peak at 108.77, and up from pre-open low of 107.75. Buy-stops were noted over the 108.00 mark on the way up, while fresh buying interest stepped in on the breach above the 200-day moving average, which sits at 108.38. Hopes for economic recovery, along with the improving virus outlook has kept risk-on conditions intact, lending support to USD-JPY.

    [GBP, USD]
    Cable printed a fresh one-month high at 1.2576. Brexit-related news gave the Pound a boost, with the London Times reporting that the UK government is expected to signal a compromise on fisheries and "level playing field" trade rules if the EU backs off from its "maximalist" demands on regulatory alignment and fishing access. Bigger picture, Cable has recovered most of the net losses seen during May . Weakness in May came amid speculation that the BoE is heading for negative rates. The next BoE Monetary Policy Committee meeting is on June 17th-18th. We don't expect the central bank 'go negative' at this juncture, based on recent signaling by BoE members.

    [USD, CHF]
    EUR-CHF printed fresh four-plus highs of 1.0768 on Tuesday, as risk-on remained in place. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB.

    [USD, CAD]
    USD-CAD dropped to new three-month lows of 1.3482, with losses coming on the back of higher oil prices, and a generally weaker USD. WTI crude topped at $36.66, levels last seen on March 6. The next major support level comes at 1.3460, which represents the 200-day moving average. Price action is set to slow ahead of Wednesday's BoC meeting, though policy is expected to remain steady, with rates unchanged at 0.25%.

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