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By XE Market Analysis June 3, 2020 2:34 pm
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    XE Market Analysis: Asia - Jun 03, 2020

    The DXY hit its lowest level since March 12, printing 97.19 lows, after peaking at 97.62 into the N.Y. open. It was another risk-on session, as incoming data, including the ADP jobs report and factory orders were ugly, but not as bad as had been expected. Wall Street rallied to three-month highs, while Treasury yields surged as well. The backdrop allowed more of the USD's (and the JPY's) safe-haven premium to unwind through the morning session. EUR-USD printed 1.1250 highs, up from 1.1184 into the open. USD-JPY topped at 108.99, up from near 108.50. USD-CAD topped at 1.3572 early on, later falling to 1.3479 after the BoC's fairly upbeat policy announcement.Cable hit a one-month high of 1.2615. Thursday's U.S. data will feature jobless claims, April trade and revised Q1 productivity.

    [EUR, USD]
    EUR-USD made its way to near three-month highs of 1.1250, coming from 1.1184 into the open, and marking its seventh-straight higher daily high. Dollar weakness versus Euro strength has been the driver during this period, as the USD's safe-haven premium continues to unwind through this period which mostly been risk-on. EUR-USD is expected to steady some through the overnight session, ahead of Thursday's ECB meeting. There would appear to be some risk for a Euro reversal, using what will likely be an increase to the Bank's asset-purchases, as an excuse to book profits.

    [USD, JPY]
    USD-JPY was on near two-month highs of 108.99, as not as ugly as expected data buoyed risk-taking levels, allowing the risk-sensitive Yen to head lower. Both the USD and JPY have remained under pressure as equity markets rally, with the Dollar continuing to see safe-haven flows reversed into commodity currencies, as an example. USD-JPY resistance is now at the April 6 high of 109.39, with support coming in at the 200-day moving average, which currently sits at 108.38.

    [GBP, USD]
    Cable posted a fresh one-month peak at 1.2615 into the London close on Wednesday. Brexit-related news have given the UK currency a boost this week, 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, according to unnamed sources. Bigger picture, the pound has recovered most of the net losses seen during May against the dollar and yen, though remains down by over 1% against the euro from month-go levels. 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, with social and economic reopening domestically, in Europe and across the world, driving a rebound from depressed levels in the UK economy.

    [USD, CHF]
    EUR-CHF printed fresh four-plus month highs of 1.0820, crossing above its 200-day moving average for the first time since January, 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 recovered some from the three-month lows of 1.3478 seen during Asian hours, peaking at 1.3572 into the North American open. The lower turn in oil prices, along with noted short-covering ahead of the BoC policy announcement at 10:00 EDT were behind the move higher. USD-CAD fell back from near 1.3535 to 1.3479 following the BoC policy announcement, which left rates on hold at 0.25%, as expected. The Bank's statement noted "While the outlook for the second half of 2020 and beyond remains heavily clouded, the Bank expects the economy to resume growth in the third quarter." And "the Canadian economy appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report". USD-CAD support now comes at the overnight three-month low at 1.3478.

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