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By XE Market Analysis June 28, 2019 1:51 pm
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    XE Market Analysis: Asia - Jun 28, 2019

    The Dollar managed modest gains in N.Y. on Friday, though for the most part, remained inside of recent trading ranges. The DXY headed to 96.30 highs, up from morning lows of 96.03. Incoming U.S. data was mixed, with income and spending data firmer, while the Chicago PMI slipped under the 50.0 boom/bust line for the first time since January of 2017. Markets were modestly optimistic over this weekend's Trump/Xi meeting in Japan, leaving Wall Street up on the day, and yields little changed. Depending on the outcome of the trade talks, there is scope for significant market moves next week. EUR-USD peaked at 1.1392, later easing to 1.1351 lows. USD-JPY was supported by decent risk levels, while USD-CAD fell to 1.3060 lows on better Canada GDP data. GBP-USD topped at 1.24735, later pulling back under 1.2700.

    [EUR, USD]
    EUR-USD traded sideways through the N.Y. morning session, managing just a 1.1372 to 1.1392 trading band since the open. Incoming U.S. data was mixed, though had little impact on the pairing, as week, month, and quarter-end conditions all likely limited activity this morning. Support now comes at the 200-day moving average at 1.1345, with resistance at Tuesday's 1.1412 three-month peak. The Euro bottomed at 1.1351 after the London close. With Fed rate cut sentiment lowered following Powell's speech earlier in the week, and heightening calls for additional ECB stimulus, risk would appear to remain to the downside for EUR-USD.

    [USD, JPY]
    USD-JPY caught a modest bid following the firmer U.S. income and expenditures data, taking the pairing to 107.81 highs from near 107.65 into the open. The firmer Wall Street open saw the Dollar hold its gains, though as stocks pulled back some, USD-JPY slipped back under 107.70. The pairing topped over 107.90 in afternoon trade. The Trump/Xi trade meeting in Japan on Saturday, which begins at 11:30 AM JST (10:30 PM EDT), could have a big impact on the FX market, and the risk-sensitive Yen in particular. Any resulting escalation of the trade war would be expected to lift the Yen, though we think the most likely outcome will be a U.S./China agreement to keep trade negotiations alive, which will mitigate currency moves.

    [GBP, USD]
    Cable has rallied to a three-day high at 1.2734 in N.Y. trade. On the week, the UK currency was near flat in our estimate of its trade-weighted value, which follows a phase of consistent weakness since early May as markets discounted the expected economic consequences of prolonged Brexit and political uncertainty in the UK, with the added prospect that the no-deal-Brexit-if-necessary Boris Johnson is the strong favourite/near certainty to become the new prime minister. The Brexit issue has gone largely dormant, but is sure to erupt once the new PM picks up the reins (expected mid July). Cable has support at 1.2650-52, and resistance at 1.2749-50.

    [USD, CHF]
    EUR-CHF eased under the 1.1100 mark in N.Y. trade on Friday, remaining heavy overall, as geopolitics keep the safe-haven CHF supported. CHF buying was noted into the weekend, which will see Trump and Xi meets to discuss trade. The cross remained above last week's near two-year low of 1.1057, bottoming at 1.1062 in N.Y on Tuesday. Trade concerns, and ongoing tensions between the U.S. and Iran will likely keep the CHF supported for now.

    [USD, CAD]
    USD-CAD fell to five-month lows of 1.3067 on Friday, following the better Canada April GDP outcome, with sell-stops reportedly tripped on the break under the February 4 low of 1.3086. Following a brief recovery, the pairing then fell to 1.3060 lows in the aftermath of the sharply improved BoC Q2 business outlook survey. WTI crude prices have held near trend highs, and should continue to support the CAD going forward.

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