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By XE Market Analysis May 4, 2021 2:22 pm
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    XE Market Analysis: Asia - May 04, 2021

    The Dollar was mixed through the N.Y. session on Tuesday, though the DXY ended on a firmer footing, up over 0.3% on the day to 91.29 highs. Data misses dented USD sentiment to a degree, as the March trade deficit widened to a record, and factory orders missed consensus expectations. Wall Street was sharply lower, with big tech taking the brunt of losses. The equity market did not take kindly to Treasury Secretary Yellen saying interest rates might need to rise to cool off economic overheating. Despite that, yields dipped on the back of the risk-off backdrop. Wednesday's U.S. calendar has the April ADP employment survey, with private payrolls expected to rise 750k versus the previous 517k. The April services ISM is penciled in at 64.0 from 63.1. Weekly MBA mortgage and oil inventory figures are also on tap.

    [EUR, USD]
    EUR-USD dipped briefly under the 1.2000 mark to a near two-week low of 1.1999, since heading back to 1.2030 in early N.Y.. Solid U.S. economic performance, largely driven by an aggressive vaccine rollout relative to Europe, should keep the USD supported going forward. The April 22 low of 1.1994 is the next downside target, with resistance at the 100-day moving average at 1.2053.

    [USD, JPY]
    USD-JPY fell to 109.04 early in the session, down from London highs of 109.49. Risk-off conditions, along with U.S. data misses weighed on the pairing earlier, though while Wall Street remains sharply lower, it has pared some of its losses, helping USD-JPY recover over 109.30. Covid lockdowns in parts of Japan, along with a horrible vaccine rollout may keep some pressure on the yen going forward. Japan has reportedly inoculated 1% of its population, as compared to nearly 45% of the population in the U.S.. Cases in Japan continue to rise.

    [GBP, USD]
    Cable fell from 1.3918 highs seen after Monday's close, to 1.3838 in early N.Y.. The pairing subsequently topped at 1.3897 after the London close. Sterling had turned lower on the back of market commentary this week pointing to the possibility of Scotland leaving the UK following local elections on Thursday. This was the premise for the forex market to sell into gains that the pound was seeing both into and after the stellar UK PMI report, which was revised higher in the final April reading for manufacturing, the best since the record 61.0 reading that was seen in July 1994. Regarding the elections, the big question is whether pro-independence Scottish parties can reach the supermajority threshold in Scotland's parliament, which would give legitimacy to their demand for a second referendum on independence.

    [USD, CHF]
    The SNB maintained its expansionary policy stance. The statement stressed that the pandemic "is continuing to have a strong adverse effect on the economy", adding that despite the "recent weakening, the Swiss franc remains highly valued" and against that background the policy rate was held at -0.75% and the bank stressed that "it remains willing to intervene in the foreign exchange market as necessary". The bank will also continue to supply the banking system with liquidity on "generous" terms. Nothing really new there, despite the fact that the SNB lifted its conditional inflation forecast on the back of higher oil prices and a weaker CHF. EUR-CHF had held above the key 110.00 level for over a month, before dipping under the level from April 9 to 13, printing a better than one-month low of 1.0975 before reclaiming the 1.10 handle again, and touching a three-week high of 1.1071 last week.

    [USD, CAD]
    USD-CAD rallied to one-week highs of 1.2346, up from 1.2275 lows seen after Monday's close. General USD strength has been the driver of gains, which came despite a seven-week high in WTI crude oil prices. The March trade figures had little impact, even as the balance flipped to deficit from surplus the previous month. USD-CAD resistance is now at 1.2400, with support at 1.2266.

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