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By XE Market Analysis March 23, 2021 2:59 pm
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    XE Market Analysis: Asia - Mar 23, 2021

    The Dollar was mostly higher in N.Y. on Tuesday, leaving the DXY at two-week highs of 92.31 highs, up from early lows of 92.06. Light risk-off conditions aided the Greenback some, while even as Treasury yields dipped, the USD continues to find support on friendly interest rate differentials, and an improving economic outlook now that the U.S. vaccine program is humming along quite smoothly. For data, new home sales missed the mark, but the weakness was largely weather related. The Richmond Fed index came in above expectations, though neither had much impact on the market. Wednesday's calendar has the February durables report, along with flash March manufacturing and services PMIs. Fedspeak will again be heavy, with Powell and Yellen in a Senate panel on the CARES Act.

    [EUR, USD]
    EUR-USD headed modestly lower in N.Y, touching 1.1856 from 1.1895 highs seen after the open. The next downside target is the 200-day moving average, which is currently at 1.1851. The March 9 low of 1.1836 will be in the cross hairs below there. Dollar favorable interest rate differentials, along with an outperforming U.S. economy should keep the EUR under pressure. In addition, ramping up Covid outbreaks on the Continent will do the single currency no favors either.

    [USD, JPY]
    USD-JPY recovered from near two-week lows of 108.41 seen ahead of the open, topping at 108.71 at mid-morning. Softer U.S. yields have weighed on the pairing since Monday, though today's generally positive USD sentiment limited losses. Bigger picture, the huge Dollar favorable interest rate differential should continue to support the pairing, with the 109.50 area a good upside target from here.

    [GBP, USD]
    Cable headed up from 1.3752 lows seen into the open, down from early Asian highs of 1.3865. General USD strength drove the pairing lower overnight, though ranges were relatively narrow through the N.Y. session, managing a 1.3802 to 1.3769 trading band. GBP-USD remains in a buy-the-dip mode, as the U.K. economy looks primed to expand quicker than many countries, largely due to the outperforming Covid vaccine program in place.

    [USD, CHF]
    Policymakers at the SNB retain an ongoing concern about the Franc's value. Unlike most central banks, the SNB explicitly incorporates the franc into monetary policy to ward off speculative purchases of the currency, which would impart deflationary forces (via cheaper imports) with the consequential impact of an unwelcome tightening in real interest rates. The central bank repeated at its latest quarterly monetary policy review that the franc remains "highly valued" and said it is ready to intervene directly in the foreign exchange market. The cross on Thursday broke to a 19-month high of 1.1098 high, with the franc set to underperform on improved hopes for global economic recovery, as Covid vaccines are rolled out. The cross has remained above the key 1.1000 mark for over two-weeks now.

    [USD, CAD]
    USD-CAD hit a near two-week high of 1.2595 ahead of the North American open, up from 1.2516 lows seen after the close on Monday. A 4+ percent drop in crude oil price was the main driver, though general USD strength has supported the pairing as well. WTI crude touched $58.50 lows, after closing at $61.55 yesterday. The March 11 high of 1.2625 is the next resistance level, followed by the 50-day moving average, currently sitting at 1.2659.

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