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By XE Market Analysis May 14, 2018 3:03 pm
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    XE Market Analysis: Asia - May 14, 2018

    The dollar lost some ground early in the session on Monday, though later perked up some, taking the DXY to 92.62 from lows of 92.25. There was no data to drive markets, and overall, FX trading conditions were quiet. EUR-USD fell from 1.1993 highs to 1.1926, while USD-JPY rallied from lows of 109.42 to 109.66 highs. USD-CAD peaked at 1.2797, while cable edged under 1.3650 from 1.3608 highs.

    [EUR, USD]
    EUR-USD has made its way to N.Y. session lows of 1.1926, after topping at intra day highs of 1.1996 at mid-morning. Today marked the third consecutive session of higher daily highs, with the pairing continuing to bounce from last week's 2018 low of 1.1822. Support came overnight from ECB's Villeroy, who hinted at rate hikes next year. Villeory said first interest rate hikes could come "some quarter, but not years, after policy maker end their bond-buying program". In addition, last week's softer U.S. inflation figures took some starch out of the dollar.

    [USD, JPY]
    USD-JPY topped at 109.66 after opening at 109.45. Sentiment in Asian markets was one of cautious optimism. Signs of easing Sino-U.S. trade tensions, and the biggest weekly rise in the S&P 500 last week in two months, and a 0.4% gain in S&P 500 futures today, aided equity markets higher across Asia, though a terrorist attack in Indonesia and threats from the Trump administration to impose sanctions on European companies that do business with Iran presented reasons for caution. USD-JPY's uptrend that commenced from sub-105.0 levels looks to have lost some momentum of late. Fed tightening expectations have moderated following some less strong than anticipated data out of the U.S., including last Thursday's release of still-benign CPI data.

    [GBP, USD]
    Cable traded moderately firmer into the N.Y. session, lifting out of the four-month low that was posted last Thursday at 1.3459, topping at 1.3608 before retreating under 1.3560. Last week's unchanged monetary policy decision from the BoE did not do the pound any favors. This week's UK labour market report will be a focus, which we expect to show an unchanged jobless rate of 4.2%, a multi-decade low, and fresh evidence of building wage pressures. Cable has support at 1.3500-02.

    [USD, CHF]
    EUR-CHF edged out a one-week high of 1.1963 and SNB Vice Chairman Zurbruegg told Schweiz am Wochenended that the franc is still "highly valued" and that the central bank sees "no reason" to give up the negative interest rate or "our willingness to intervene in the foreign exchange market." We expect EUR-CHF to remain broadly underpinned.

    [USD, CAD]
    USD-CAD continued to trade inside of Friday's range, stuck between 1.2751 lows, and 1.2797 highs. WTI crude is back over $71/bbl, limiting upside potential, while NAFTA uncertainty will keep losses contained for now. The disappointing April employment report out of Canada, which weakened BoC tightening expectations, has helped give the pair support, after declining last week amid the surge in oil prices to four-plus year highs.

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