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By XE Market Analysis May 21, 2020 1:47 pm
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    XE Market Analysis: Asia - May 21, 2020

    The Dollar was mostly firmer in the aftermath of the still bad, but generally better than expected U.S. data releases, which had jobless claims above forecasts, the Philly Fed index beat consensus, while leading indicators and existing home sales were less-bad than expected. USD-JPY had traded to 107.64 lows into the claims data, later making its way to 107.84 in late morning. EUR-USD topped at three-week highs of 1.1009, later reversing to 1.0937 lows. USD-CAD advanced from 1.3889, later peaking over 1.3960. Cable chopped around between 1.2206 and 1.2249. The return of moderately risk-off conditions appeared to have given the USD some support as well. Since the wild swings seen in the Dollar at the start of the pandemic in March, FX conditions have calmed significantly, leaving the Dollar in relatively narrow and well worn ranges. More of that appears to be in the cards, as markets focus on how well the slow economic recovery fares.

    [EUR, USD]
    EUR-USD fell from three-week highs of 1.1009 seen into the U.S. data, to a low of 1.0937. The less-bad than consensus data helped the dollar some generally, while in the case of EUR-USD, the 200-day moving average, looming at 1.1015, was enough to prompt a round of position squaring. Bigger picture, as the U.S. and Europe emerge from lock down, both are likely to remain in similar predicaments, go slow will be the rule. There is not much light between the ECB and the Fed now, and as a result, we continue to see EUR-USD plod along in familiar ranges for now.

    [USD, JPY]
    USD-JPY slipped to session lows of 107.64 ahead of the U.S. data slate, later recovering modestly to 107.84, as incoming data was less-horrible than expected. General USD firmness prevailed, with the DXY halting its four-consecutive sessions of lower daily lows. USD-JPY will likely continue to have limited two-way risk, as uncertainties surrounding the economic outlook remain high. As countries break their quarantines and get back to work, will likely not be linear in nature, results will most likely be mixed, as fresh outbreaks remain a fear.

    [GBP, USD]
    The Pound consolidated modest gains seen in the wake of the above-forecast UK PMI release, which saw Cable reach a post-data peak of 1.2249, leaving the intraday high at 1.2255 unchallenged. The preliminary May UK composite PMI rebounded more than expected, as did both of the underlying manufacturing and services PMI readings. We continue to think that Sterling has too much upside potential from here, given the ongoing risk that the UK leaves its post-Brexit transition membership of the EU's single market at year-end.

    [USD, CHF]
    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. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB.

    [USD, CAD]
    USD-CAD was held down by higher oil prices early in the session, as WTI crude hit $34.63 highs, levels last seen on March 11. Later, the pairing turned higher, as incoming U.S. data proved to be mostly better than expected, and as a round of profit taking took crude back under $33.30. USD-CAD bottomed at 1.3889, later peaking at 1.3970. The 1.40 level now marks a psych resistance level.

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