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By XE Market Analysis June 11, 2021 2:12 pm
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    XE Market Analysis: Asia - Jun 11, 2021

    The Dollar moved broadly higher in N.Y. on Friday, taking the DXY to highs of the week at 90.61. The index opened near 90.30, and had bottomed at 89.96. Treasury yields formed up some into the weekend, with position squaring following a week of significant yields drops driving the bond market. Incoming data was light, with the University of Michigan consumer sentiment on tap, which improved more than expected, and improved USD sentiment. Wall Street was narrowly mixed through the session, with investors perhaps remaining sidelined ahead of the FOMC meeting, and a heavy U.S. data slate next week.

    [EUR, USD]
    EUR-USD had its worst day in a while on Friday, falling from London highs of 1.2193 to 1.2093, a near one-month low, into the London close. General Dollar strength was the main driver, as pre-weekend position paring was a feature. The uptick in Treasury yields provides some USD support through the session. Meanwhile, the ECB at its policy review Thursday stuck to its commitment of significantly higher PEPP purchases, which disappointed some, who had been anticipating the removal of the word "significantly" from the bank's statement. This seems to have curtailed EUR-USD's upside potential, at least for now. The 50-day moving average at 1.2089 provides support going forward.

    [USD, JPY]
    USD-JPY peaked at 109.84 at mid-morning, printing highs of the week in the process. The pairing had touched a low of 109.32 overnight. Pre-weekend short covering has been a feature, prompted by a modest uptick in Treasury yields, which had been under pressure for much of the week, on the back of easing inflation concerns. The Dollar has moved broadly higher this morning, taking the DXY to six-session highs. Next week's U.S. calendar could have some impact, as PPI, retail sales, industrial production, housing starts and trade prices are all on tap. For USD-JPY the psych 110.00 level marks resistance, with support at 109.12, the 50-day moving average.

    [GBP, USD]
    Cable lost ground in N.Y. on Friday, ending the week on a softer footing, as U.K. data disappointed, and as the USD overall perked up into the weekend. The UK released April and second-revision Q2 GDP data Friday, alongside April industrial production and trade data. Monthly GDP rose 2.3%, slightly missing expectations for 2.4%, and manufacturing, production and construction data also disappointed. Next week brings the latest BoE data on monthly lending and money supply (Tuesday), May inflation data (Wednesday) and May retail sales (Friday). Markets are discounting a rise in headline CPI to 1.8% y/y from 1.5%, with core CPI lifting to 1.5% y/y from 1.3%, and a 1.8% m/m expansion in retail sales.

    [USD, CHF]
    The SNB continues to maintain its expansionary policy stance. The statement stressed that the pandemic "is continuing to have a strong adverse effect on the economy", adding that despite the "recent weakening, the Swiss franc remains highly valued" and against that background the policy rate was held at -0.75% and the bank stressed that "it remains willing to intervene in the foreign exchange market as necessary". The bank will also continue to supply the banking system with liquidity on "generous" terms. Nothing really new there, despite the fact that the SNB lifted its conditional inflation forecast on the back of higher oil prices and a weaker CHF. EUR-CHF briefly topped the key 110.00 mark on June 1, though since then has faded, bottoming at 1.0875 on Friday, right at its 200-day moving average.

    [USD, CAD]
    USD-CAD remained inside of Thursday's trading band early on, ranging between overnight lows of 1.2080 and 1.2120, finding support over 1.2000 early in the session, and later rallying to near one-month highs of 1.2177. Firm oil prices limited upside today, while downside was hampered by the BoC's relatively dovish statement on Wednesday. USD-CAD has largely been in consolidation mode this week, trading between 1.2177 and 1.2057 since Monday. the 20-day moving average, currently at 1.2082 has been a fulcrum, with prices not straying far from the level. The big picture still favors further CAD gains, as oil and commodity prices overall are expected to remain firm given the general global reflation trade under way, as Covid dissipates.

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