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By XE Market Analysis May 18, 2020 2:43 pm
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    XE Market Analysis: Asia - May 18, 2020

    The Dollar was broadly lower on Monday, seeing safe-haven USD flows reverse on the back of a strong bout of risk-on. Stocks and yields headed higher following reports that pharma company Moderna's coronavirus vaccine shows positive signs of working. There was little in the way of incoming data, and the FX market largely focused on the improved risk backdrop. EUR-USD rallied from opening lows near 1.0820, later peaking over 1.0925. USD-JPY peaked at 107.50 before falling back to 107.21. USD-CAD fell sharply to 1.3956 after opening at 1.4050. GBP-USD meanwhile, rallied to 1.2227, after opening under 1.2120.

    [EUR, USD]
    EUR-USD broke out of its recent trading band. rallying to two-week highs of 1.0920, after opening near 1.0820. Risk-on saw some safe-haven Dollar flows reverse after Fed Chairman Powell warned that the Fed is not out of ammunition, and could do more, while warning that he wouldn't bet against the U.S. economy neither in the short nor the long run. Positive news on the vaccine front helped move risk taking levels higher as well. EUR-USD is well above its 20-day moving average at 1.0848, though has since dipped below its 50-day moving average at 1.0907.

    [USD, JPY]
    USD-JPY remained inside of a narrow, well-worn trading band to start the week, idling between opening lows of 107.26 and 107.50 highs through thee morning, later bottoming at 107.21. Risk-on conditions as witnessed by sharply higher equities, and firmed up Treasury yields provided some early support to the pairing, though broad USD selling eventually put some weight on USD-JPY. Bigger picture, further consolidation can be expected until we see a clearer path as to how global economies come back online. Support is at the 20-day moving average at 107.07, with resistance at the 50-day moving average at 107.73.

    [GBP, USD]
    Cable reversed higher in N.Y. trade, peaking at 1.2227 after printing a near eight-week low at 1.2076. The low was seen after BoE chief economist Haldane hinted that the central bank is considering going negative with its interest rate policy, and on news that the latest round of post-Brexit trade talks with the EU finished on Friday without offering much sign of encouragement. Lifting the pound has been the surge in global equity markets. A slew of UK data are due this week, starting with the monthly labor market report tomorrow, and including inflation figures on Wednesday and retail sales data later in the. A large spike in unemployment, a sharp drop in the inflation rate, and an unprecedented plunge in retail sales can be expected.

    [USD, CHF]
    EUR-CHF spiked to better than two-month highs of 1.0662 on Monday, with buy-stops tripped over 1.0611, which was the April 28 peak. A risk-on session drove the pairing. 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 printed lows of 1.3956, down from Asian session highs of 1.4107, marking the lowest level seen since May 11. The move has come in concert with WTI crude's 9% rally over $32.00/bbl, and the general risk-on backdrop. The pairing is back under its 50-day moving average at 1.4079, and its 20-day moving average at 1.4052. Support is at the May 11 low of 1.3900.

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