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By XE Market Analysis March 24, 2021 2:32 pm
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    XE Market Analysis: Asia - Mar 24, 2021

    The Dollar was relatively steady, though ended the session slightly higher overall. The DXY printed four-month highs of 92.61ahead of the open, and meandered between there and 92.42 through the session. Incoming data was mixed, with the February durables report missing the mark, while Markit manufacturing and services PMIs both improved. Neither had much impact on the market. Wall Street was mixed, with the Dow and S&P 500 gaining as Fed chair Powell and Treasury Secretary Yellen remained upbeat on the U.S. recovery. The tech-heavy NASDAQ lagged, with valuations there still considered to be lofty. Treasury yields were fairly stable on the session. Hopes for a U.S. recovery, along with a yields advantage should keep the USD supported going forward. On Thursday, the U.S. calendar features the third release of Q4 GDP. Weekly jobless claims are on tap, along with Q4 after tax corporate profits. The Treasury will auction $62.0 bln of 7-year notes.

    [EUR, USD]
    EUR-USD bottomed at four-month lows of 1.1812 ahead of the open, down from overnight highs of 1.1851. The pairing dipped under its 200-day moving average of 1.1854 late in the session on Tuesday, and has remained below it ever since. The last time EUR-USD dipped infer its 200-dma was in May of last year. The next downside target is the November 23 low of 1.1800, with sell-stops expected under the figure. 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, along with very slow vaccine rollout will limit Euro gains.

    [USD, JPY]
    USD-JPY rallied to four-session highs of 108.96, up from 108.64 at the open, and overnight lows of 108.45. The USD has been generally firmer through the session with a slight uptick in Treasury yields helping. For USD-JPY, the 109.00 level has been been a tough one to hold, failing to close above the figure in its last five attempts. There has been talk of Japanese exporter sellers from 109.00 and higher, which may have resulted in capping USD-JPY. Yield differentials highly in favor of the USD, however, should keep risk to the upside for USD-JPY.

    [GBP, USD]
    Cable was fairly steady through the N.Y. session, ranging between 1.3696 and 1.3733. Much stronger than expected PMI data out of the UK was largely offset by a surprising drop in CPI, to a rate of just 0.4% y/y in February after 0.7% y/y in the month prior. The data will likely prove to be an aberration, with a sharp burst of base-effect y/y increases set to kick in over the coming months, due to the sharp drop in commodity and other prices that was seen as a consequence of the global measures taken to combat the pandemic a year ago. As for the PMI, data, the preliminary March surveys for the manufacturing and services sectors came in much stronger than expected, with the headline composite reading rising to a seven-month high of 56.6, up from 49.6 in February.

    [USD, CHF]
    The Swiss National Bank is widely expected to keep policy settings on hold at the quarterly policy review on Thursday. Like other central banks, the SNB is likely to keep all options open against the background of a pandemic that is far from over. The economic outlook for the second half of the year may have improved considerably, thanks to developments in the U.S., but the near-term risks for the domestic economy remain tilted to the downside given the prevailing increase in Covid restrictions across much of the continent, which will keep the central bank committed to providing ongoing monetary support. The ECB decided to front-load its asset purchase schedule to try and keep control of longer term rates, and that may help the Swiss central bank to sit on the fence for now.

    [USD, CAD]
    USD-CAD rallied to two-week highs of 1.2609 in early North American trade, supported by the sharp selloff in oil prices, and a generally firmer USD. Since then, WT crude has recovered over $60.70, after falling to $57.25 on Tuesday. USD-CAD has since reacted by falling back to 1.2543 lows. Until the container ship that that ran aground in the Suez Canal can be cleared, Mid-East oil exports will slow significantly, which will keep oil prices firm for the time being, and continue to weigh on USD-CAD.

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