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By XE Market Analysis June 10, 2019 2:57 pm
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    XE Market Analysis: Asia - Jun 10, 2019

    The Dollar chopped around inside of relatively narrow ranges through the N.Y. session on Monday, with the DXY moving between 96.74 and 96.93. Risk-on conditions were back in play following the U.S. dropping its tariff threat on Mexico. Treasury yields rose with Wall Street, though the pricing in of Fed rate cuts kept USD gains contained. EUR-USD dipped briefly under 1.1300 before settling under 1.1320. USD-JPY idled inside a 108.67 and 108.46 trading band. USD-CAD printed 1.3252 lows, later recovering over 1.3270. Cable bottomed at 1.2654 at the open, later bouncing to 1.2697 highs.

    [EUR, USD]
    EUR-USD eased to 1.1291 lows at mid-morning in N.Y., with the Dollar helped by firmed-up Treasury yields, coming on the back of easing trade concerns, and higher equities. The pairing later moved back above the 1.1315 mark, though well under Friday's near three-month high of 1.1347, printed following the weaker U.S. jobs report on Friday. The pricing in of U.S. rate cuts will limit EUR-USD's downside potential going forward, though the ECB's dovish policy stance will limit the Euro's advances. As a result, range trade mentality may be in the cards for the time being. Support comes at Friday's 1.1252 bottom, with resistance at Friday's high, then the 200-day moving average at 1.1367.

    [USD, JPY]
    USD-JPY topped at 108.71, a seven-session high in London morning trade, with the pairing taking its cue from ramped up risk-taking levels following the apparent cancellation of U.S. tariffs on Mexican goods. The news went some way to alleviate general trade worries, and allowed global equities to rally, and Treasury yields to edge higher, both supportive of USD-JPY. From here, resistance comes at the psych 109.00 level, then the 20-day moving average at 109.25. Support comes at 108.00, then Friday's low of 107.88.

    [GBP, USD]
    Cable bottomed at 1.2654, the lowest level seen since last Tuesday. April GDP contracted 0.4% m/m, the biggest monthly decline since March 2016, while April manufacturing fell by a 3.9% m/m rate -- the biggest contraction since June 2002. The data build an increasing sense of gloom about an economy being afflicted by prolonged political and associated Brexit uncertainty, coupled with a slowing economies in continental Europe. The pound looks like it will remain firmly on the out-of-favour list of overlay and reserve managers, especially with arch Brexiteer Boris Johnson favourite to become the new prime minister. "BoJo" is running his campaign on a hard, no-deal-if-necessary Brexit, which would see the UK adopt less favourable WTO trading terms after exiting the EU.

    [USD, CHF]
    EUR-CHF lifted to an eight-day high at 1.1210, reflective of broader Euro gains and a degree of unwinding in safe-haven positioning amid a burgeoning in central bank easing expectations. The gain put some further space in from the 23-month low that was printed at 1.1119 last week. The SNB's Alternate Governing Board Member Moser said recently that in his view "if we had higher interest rates then we would have a stronger exchange rate", which something the central bank is ever eager to prevent. The SNB continues to bank on the combination of a negative deposit rate and the threat of ad hoc currency intervention to keep the CHF under control, while trying to limit the impact of the negative rates on the domestic economy with the help of macroprudential instruments. Moser said that the risks in the Swiss real estate sector remain bearable, although he admitted that in the current environment these could increase.

    [USD, CAD]
    USD-CAD printed three-plus month lows of 1.3238 in early Asian dealings, later recovering to 1.3280 at the north American open, then falling back to 1.3252 lows in North America. The apparent resolution of the U.S./Mexico trade dispute helped the CAD, as did the general return of risk-on conditions. In addition, those same factors supported oil prices, also a boost for the CAD. The pairing traded under its 200-day moving average (1.3268) for the first time since early March, and a close under the level will be taken as a bearish sign.

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