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By XE Market Analysis June 18, 2019 2:38 pm
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    XE Market Analysis: Asia - Jun 18, 2019

    The Dollar headed higher ahead of the N.Y. open on Tuesday, led by EUR-USD losses following dovish comments from ECB's Draghi. The DXY topped at 97.76 from overnight lows of 97.37. EUR-USD ranged between 1.1183 and 1.1212 through the N.Y. session. USD-JPY was boosted to 108.67 highs from 108.06 following a Trump tweet saying he will meet with China's Xi at the G-20 next week to discuss trade. Stocks rallied sharply on the news, supporting USD-JPY in the process. USD-CAD printed 1.3375 lows, as WTI crude surged as much as 4%. GBP-USD meanwhile, fell to fresh five-plus month lows of 1.2506 on ongoing Brexit fears.

    [EUR, USD]
    EUR-USD hit the skids following dovish talk from ECB chief Draghi, who not only said that additional stimulus will become necessary if the outlook doesn't improve, but also clarified that not only can rates go down further, but that there is also room to extend the QE program.who played up the potential for further rate cuts, along with the crash in Germany's ZEW economic sentiment data. Draghi said downside risks are increasing, opening the potential for further rate cuts and QE. EUR-USD printed better than two-week lows of 1.1182. Support is now at 1.1160, the June 3 low.

    [USD, JPY]
    USD-JPY rallied from eight session lows of 108.06, peaking at 108.67 after the sharply higher Wall Street open, a rebound in Treasury yields, and a general risk-on backdrop. Prospects for the renewal of U.S./China trade talks has seen the Yen's safe-haven status reversed, though after failing to break over Monday's high of 108.772, USD-JPY profit taking set in, taking the pairing back down to 108.23 lows.

    [GBP, USD]
    Another five-month low for Cable, this time at 1.2506. The latest down phase was a led by EUR-USD and Dollar outperformance over spill, with the Pound holding up better against the Euro. The Conservative Party's leadership contest is down to the final three, with Boris Johnson looking more likely than ever to win, and become the new prime minister. He favors a "managed Brexit", though in reality, assuming that the EU won't budge on its red lines even in the face of a credible threat of the UK walking away without a deal, the risk has risen for the UK leaving the EU without an agreement on divorcing terms or an outline for a future trading relationship, which would rule out a transitional phase and would see the nation adopt trading on WTO terms at midnight on October 31.

    [USD, CHF]
    EUR-CHF fell to eight-session lows of 1.11 74 following dovish Draghi comments, though later recovered back over the 1.1200 mark. Draghi hinted that further rate cuts and QE could be in the cards if conditions don't improve. Last 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.

    [USD, CAD]
    USD-CAD fell to 1.3375 lows, down from pre-open highs of 1.3432. Losses came on the back of sharply higher oil prices, as WTI crude rallied more than 4%, and also on risk-on conditions, which came following Trump's tweet on resuming trade talks with China. Weaker Canada manufacturing data early in the session helped put a floor under the pairing, though USD-CAD is back below its 20- and 50-day moving averages, which now provide resistance at 1.3405 and 1.3414.

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