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By XE Market Analysis June 11, 2019 1:59 pm
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    XE Market Analysis: Asia - Jun 11, 2019

    The Dollar was range bound, but remained heavy overall in N.Y.trade on Tuesday, consolidating sharp losses seen since last week. Slightly cooler than expected May U.S. PPI weighed some on the Greenback, while a sputtering Wall Street didn't help the USD either, as Treasury yields turned marginally lower. EUR-USD managed 1.1331 highs, after opening near 1.1300. USD-JPY pulled back as risk appetite faded, bottoming at 108.45, after printing 108.80 at the open. Cable topped near 1.2730 from just under 1.2700, while USD-CAD reclaimed the 1.33 mark on softer oil prices.

    [EUR, USD]
    EUR-USD maintained a narrow 1.1331 to 1.1302 trading band since the start of N.Y. trade, with the Dollar overall largely in a holding pattern following fairly steep losses seen over the past week or so. 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 of 1.1347, then the 200-day moving average at 1.1367.

    [USD, JPY]
    USD-JPY eased from the eight session highs of 108.80 seen early in the session, falling to lows under 108.45. Wall Street squandered early gains, which prompted some USD-JPY position paring. The latest stock market rally, in place since last week appears to be running out of steam, with trade and rate cut hopes likely close to being fully priced in. Should this be the case, the risk-sensitive USD-JPY is likely to put an end to its five-straight sessions of higher daily highs.

    [GBP, USD]
    Cable vaulted higher on the better UK wage data, which resulted in a squeeze on short positions, especially with the data coming after BoE MPC hawk Saunders reminded markets that prevailing Brexit uncertainty won't necessarily stop the central bank from tightening policy, if it were necessary to anchor inflation. GBP-USD rallied from 1.2670 to N.Y. highs of 1.2728. We don't see much upside potential for the pound at this juncture, especially with arch Brexiteer Boris Johnson favorite to become the new prime minister. Johnson is running his campaign on a hard, no-deal-if-necessary Brexit, which would see the UK adopt less favorable WTO trading terms after exiting the EU.

    [USD, CHF]
    EUR-CHF lifted to a near two-week high at 1.1243 in N.Y. on Tuesday, 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 closed just a hair above its 200-day moving average (1.3269) on Monday, trading to 1.3251 lows early in the session, as WTI crude prices briefly topped the $54 level. As crude prices later eased, and as the moderately risk-on backdrop faded, USD-CAD made its way to highs over 1.3315, where domestic name sellers reportedly emerged. There is little on the Canadian calendar to move the Loonie through the remainder of the week, so USD-CAD direction will continue to be influenced by risk levels, oil prices, and U.S. data releases.

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