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By XE Market Analysis May 12, 2020 3:04 pm
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    XE Market Analysis: Asia - May 12, 2020

    The Dollar stumbled a bit early in the session on Tuesday, though later perked up some. For the most part, narrow trading ranges prevailed, as the FX market remains in consolidation mode, likely to continue until we get a better sense of how the unlocking of economies turns out. The markets overlooked the steeper core CPI decline. Wall Street lost ground, while Treasury yields edged lower. EUR-USD pulled back under 1.0850 from 1.0885 highs. USD-JPY recovered from 107.22 lows to 107.42, before fading again. USD-CAD headed to 1.4042 from early lows of 1.3972, while GBP-USD slipped from 1.2377, to 1.2267.

    [EUR, USD]
    EUR-USD topped at one-week highs of 1.0885 early in the session, since pulling back to 1.0847 in afternoon trade. Modest gains came following the cooler U.S. CPI report, though sellers emerged ahead of the 1.0900 level, which is regarded as a psych resistance point. Big picture, the pairing remains inside of recent trading ranges, and until a clearer picture of the re-opening of economies becomes more clear, more of the same is anticipated.

    [USD, JPY]
    USD-JPY touched intra day lows of 107.22 in late morning trade, down modestly from 107.45 highs seen early in the session. The risk backdrop has been relatively neutral today, helping to keep the pairing hemmed in. As new virus outbreaks remain a fear as economies attempt to re-open, the risk-sensitive Yen may still be prone to rounds of strength going forward. From here, the 50-day moving average at 107.59 marks resistance, with support coming in at Monday's 106.50 low.

    [GBP, USD]
    Cable slipped to 1.2267 lows after the London close, down from early highs of 1.2377. The uncertain tone in global equity markets translated to weakness in the pound, which has developed a quite strong positive correlation with stock market direction during the pandemic era so far. Despite the high infection rate and death total in the UK, the country this week has commenced a baby-step toward reopening its economy, with non-essential manufacturing reopening. The UK and EU, meanwhile, are amid the next round of trade talks, with agreement likely to remain elusive. As a result, the Pound is likely to remain under some pressure.

    [USD, CHF]
    EUR-CHF was held to narrow ranges in the low 1.05s on Tuesday. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

    [USD, CAD]
    USD-CAD traded under the 1.4000 mark, after hitting intra day lows of 1.3973 at the North American open, before peaking at 1.4025. The rise in WTI crude prices supported the CAD early on, though general USD softness has weighed on the pairing as well. As USD demand subsequently stepped up, USD-CAD rallied over 1.4040. Canadian crude prices have recently recovered, after trading in negative territory for a few days in the past two-weeks. The Western Canadian Select grade of crude is reportedly fetching over $22.00 on Tuesday. Monday's 1.3900 low is now the nearest support level, with resistance at 1.4030, representing the 50-day moving average.

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