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By XE Market Analysis June 14, 2019 2:03 pm
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    XE Market Analysis: Asia - Jun 14, 2019

    The Dollar index climbed to two-week highs in N.Y. trade on Friday, with decent incoming retail sales and industrial production supporting. In addition, pre-weekend safe-haven USD buying was apparent,with traders loading up on the back of geopolitical risk, especially in the Mideast. The DXY rallied to 97.58 highs, after bottoming at 97.08 ahead of the early data. EUR-USD fell from 1.1257 to 1.1203 lows, while USD-JPY struggled some on moderately risk-off conditions, topping at 108.58. USD-CAD topped over 1.3400, while Cable printed better than two-week lows of 1.2588.

    [EUR, USD]
    EUR-USD fell to seven-session lows of 1.1203, coming from 1.1267 highs at the open. The pairing is now trading under its 20- and 50-day moving averages, currently at 1.1219 and 1.1218, respectively. Geopolitical tensions in the Mideast, along with lingering trade concerns have seen the Dollar benefit from safe-haven flows over the past two-sessions, though ahead of what is likely to be a dovish leaning FOMC statement next week, we look for further downside price action to be limited. Next support comes at the June 6 low of 1.1200.

    [USD, JPY]
    USD-JPY peaked at 108.50 after the solid retail sales and industrial production outcomes, up from opening lows of 108.19. The uptick in Treasury yields has been mildly supportive, though the moderate risk-off backdrop has limited gains. Further Dollar gains can be expected to be limited into next week's FOMC announcement, where a dovish slant is expected. The Fed should remove the word "patient" and replace it with something akin to Chair Powell's June 4 remark that the Fed will be "closely monitoring the implications of these developments" on trade and other matters.

    [GBP, USD]
    Cable had been relatively steady in recent sessions, though slipped to two-week lows in N.Y. on Friday, bottoming at 1.2588. General Dollar strength was the main driver, with safe-haven flows supporting. The Brexit process is now frozen as the Conservatives go about the business of selecting a new party leader/prime minister. Boris Johnson remains the strong favorite. Whoever it is, the new PM should be installed in No.10 by the end of July, little more than three months until the October 31 Brexit deadline. Given that there has been no sign that the EU will give any ground on the Northern Ireland backstop issue, the new PM will find themselves in exactly the same predicament/quagmire that consumed Theresa May If Boris, a notorious opportunist, is the new PM, then we can expect he would try and use the credible threat of leaving the EU without a deal in the hope of shifting Brussels out of its red lines. In the meantime, Sterling is liable to remain in sell-the-rally.

    [USD, CHF]
    EUR-CHF dropped back under the 1.1200 mark in N.Y. on Friday, from a two-week high at 1.1264 seen earlier in the week. The fall was driven by the Swiss Franc, which rallied in the wake of the SNB policy announcement yesterday. There didn't appear to be a specific catalyst, and the SNB's message was dovish, in fact, stating that downside risks to the economy have increased and that the overall policy setting "remains as expansionary as before." The central bank also nudged its inflation forecast lower, now expecting CPI to average just 0.6% y/y this year, 0.7% in 2020, and 1.1% y/y in 2021. The currency had weakened earlier in the week as market participants eyed the policy decision, so the price action looks to have been a buy-the-rumor-sell-the-fact type of reversal.

    [USD, CAD]
    USD-CAD printed seven-session highs of 1.3404,up from early Asian lows of 1.3324. General USD strength through the morning was the main driver, though relative weakness in oil prices have supported as well. WTI crude remains under the post-tanker attack highs in the Gulf of Oman yesterday, with WTI crude so far being unable to breach above the $53.00 mark. USD-CAD trades above its 100-day moving average, currently at 1.3349, which now becomes support, though stalled into the 20- and 50-day moving averages at 1.3408 and 1.3412, respectively.

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