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By XE Market Analysis May 22, 2019 3:33 pm
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    XE Market Analysis: Asia - May 22, 2019

    A lack of data, and relatively uneventful risk-backdrop saw the Dollar dip in early trade, then recover to near unchanged into the close. EUR-USD ranged between 1.1180 and 1.1151,ending near 1.1160. USD-JPY was range bound settling near 110.35, while USD-CAD rallied to 1.3435 on weaker oil prices, after bottoming at 1.3358 following strong Canada retail sales. Cable bounced from five-month lows of 1.1.2625, topping at 1.2694 after the London close. The Dollar was little changed following the release of the FOMC minutes, ending up largely unchanged. EUR-USD dipped to 1.1158 from near 1.1165, and has since steadied over 1.1160. USD-JPY bounced around inside of 110.24-32. The minutes said the FOMC would remain patient, though some concern over low inflation was noted.

    [EUR, USD]
    EUR-USD broke its streak of consecutive lower daily lows, bottoming at 1.1149, after trading to two-plus week lows of 1.1142 on Tuesday. The pairing had peaked at 1.1175 early in the session, and later steadied over the 1.1150 mark. The FOMC minutes revealed few surprises, and there was little FX market reaction. Support remains at the May 3 low of 1.1135, with resistance at the 20-day moving average at 1.1185.

    [USD, JPY]
    USD-JPY was fairly steady through the N.Y. morning session, ranging between 110.43 and 110.26 since the open. Moderate risk-off conditions have kept a capon the pairing, with the 20-day moving average, currently at 110.50, reverting to a resistance level. Support comes in at Tuesday's low of 110.03.

    [GBP, USD]
    Cable printed fresh trend low at 1.2625, the lowest level seen since early January. The latest trigger has been the negative reception that Prime Minister May's new deal on Brexit, both from Labour, the principle opposition, and by Eurosceptic members in her own party. May's days look numbered, and the possibility for a new general election has risen substantially, as have the chances for a no-deal Brexit scenario. The debate has polarized around a hard no-deal-exit-if-necessary Brexit on the one hand, and a remain-in-EU on the other. This week's parliamentary EU elections, which take place from tomorrow through to Sunday, will in the UK essentially be a proxy vote on EU membership. A strong showing by the brand new Brexit Party would likely see the odds for a no-deal Brexit ratchet up further, while a strong showing by pro-remain parties, which include the the Liberal Democrats, the newly established ChangeUK Party, and the Scottish National Party, would likely have the converse effect. We continue to advise trend following with regard to Cable, for now.

    [USD, CHF]
    EUR-CHF posted a five-week low at 1.1245. The cross has now corrected over half of the gains seen during the pronounced rally that was seen in April. The SNB's Alternate Governing Board Member Moser said last week that in his view "if we had higher interest rates then we would have a stronger exchange rate", something the central bank is eager to prevent. The SNB continues to bank on the combination of a negative deposit rate and the threat of ad hoc currency intervention to keep the CHF under control, while trying to limit the impact of the negative rates on the domestic economy with the help of macroprudential instruments. Moser said so far the risks in the Swiss real estate sector remain bearable, although he admitted that in the current environment these could increase. EUR-CHF has resistance at 1.1320-23.

    [USD, CAD]
    USD-CAD fell to one-month lows of 1.3358 from over 1.3390 following the stronger Canada retail sales print. The pairing fell decisively through its 50-day moving average of 1.3395 in the process. Softer oil prices likely limited downside potential this morning, with the pairing bouncing back to 1.3435 as WTI crude approached the $61.00 mark.

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