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By XE Market Analysis June 17, 2019 1:37 pm
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    XE Market Analysis: Asia - Jun 17, 2019

    The Dollar was largely rangebound in N.Y. trade on Monday, though came under some selling pressure following a sharply lower Empire State index, and softer housing data. The DXY managed a 97.35 to 97.52 trading band. EUR-USD topped at 1.1247 after the data, later dipping to lows under 1.1220. USD-JPY ranged between 108.72 and 108.53, while USD-CAD hovered near 1.3400. Cable printed 5-month lows of 1.2554. We expect the Dollar to consolidate ahead of Wednesday's FOMC announcement, where no rate changes are expected. Focus will be on the degree of dovishness seen from the statement and the press conference.

    [EUR, USD]
    EUR-USD has remained near the bottom of its one-week trading band, though found some support following a soft N.Y. Fed index, and weaker housing data earlier. With general weakening of incoming U.S. data lowering the volume of cries for a Fed rate cut, and the ECB moving closer to an official easing bias, EUR-USD downside would appear to be the riskier direction. A close under the 50-day moving average at 1.1218 could result in some follow through selling overnight.

    [USD, JPY]
    USD-JPY printed one-week highs of 108.72 into the N.Y. open, later pulling back to 108.53 lows after the much weaker Empire State index.The pairing has since headed over 108.65, supported by moderate risk-on conditions, and slightly firmer Treasury yields. The BoJ announces policy at the end of its meeting on Thursday, and is widely expected to maintain unchanged policy. Governor Kuroda last week told Bloomberg that the central bank had further tools in its stimulus toolkit, though he said further stimulus was not needed currently. This said, the Bank is seen in perma-dove mode, leaving the market to perhaps pare long yen positions until then.

    [GBP, USD]
    Cable touch a five-month low of 1.2554 ahead of the London close. The breach lower further reaffirmed a bear phase that has been unfolding since early May. There is no data of note out of the UK until May inflation and retail sales reports, due this Wednesday and Thursday, respectively. The Brexit process remains on ice as the the Conservative Party's leadership contest continues. Boris Johnson remains the strong favorite, though there is an outside risk that his lead will be eroded as the sharp end of the process draws nearer. Most candidates, like Boris, are advocating a hard, no-deal-if-necessary Brexit. This backdrop should keep a lid on the Pound.

    [USD, CHF]
    EUR-CHF recovered from overnight lows under 1.1200, topping at 1.1222 in N.Y. Lat week's drop was driven by the Swiss Franc, which rallied in the wake of the SNB policy announcement. 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 was rangebound overnight, holding above 1.3400, though unable to trade above Friday's seven-session high of 1.3422, despite WTI crude trading under $52.00 earlier. Modest USD weakness has capped so far this morning, while the 20- and 50-day moving averages, at 1.3407 and 1.3414, respectively, have acted as magnets, confining the pairing to a narrow trading band. USD-CAD later traded to 1.3394 lows, though quickly reclaimed the 1.34 handle.

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