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By XE Market Analysis May 23, 2018 3:45 pm
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    XE Market Analysis: Asia - May 23, 2018

    The DXY advanced to new trend highs in N.Y. morning trade on Wednesday, though pulled back a bit after the FOMC minutes release, even after the Fed indicated a June rate hike is in the cards, and revealed concerns that trade disputes could damage business sentiment. EUR-USD rallied to 1.1695 from 1.1680, while USD-JPY slipped to 110.19 from near 110.30. USD-CAD pulled back from highs on reports that NAFTA talks were progressing. Cable, meanwhile, remained heavy under 1.3360.

    [EUR, USD]
    EUR-USD printed new trend lows of 1.1676, with the Italian political situation continuing to weigh on the euro. In addition, soft Eurozone PMIs didn't do the EUR any favors either.

    [USD, JPY]
    USD-JPY bottomed at 109.56 into the N.Y. open, down nearly 200 points from Monday's four-month high of 111.39. Risk-off conditions, fueled by geopolitics has been the driver behind the yen's strength, with doubts over the prospects for the U.S./N. Korea summit on top of the list. The pairing has traded under its 200-day moving average of 110.21, which now reverts to resistance..

    [GBP, USD]
    Cable recovered above 1.3550, in what was a case of pre-London close squaring of short positions, after printing five-month lows of 1.3305. While UK April headline CPI unexpectedly ebbed to 2.4% from 2.5% y/y in March, the data can be downplayed to a degree because of the early timing of Easter this year, while rising oil prices, if sustained, can also be expected to exert upside influence on inflation rates.

    [USD, CHF]
    EUR-CHF posted an 11-week low at 1.1616. The cross is down nearly 1.7% over the last week, which is the biggest movement over this period out of the dollar pairings and cross rates that we keep tabs on, declining for what is now an eighth consecutive session. The driving dynamic has been a souring sentiment towards the euro on concerns about the policies of the newly forming anti-establishment and Eurosceptic coalition government in Italy. EUR-CHF is down by 3.2% from the 41-month that was printed a month ago at 1.2005, which was the culmination of a 10-month rally phase, and which in turn was a reflection of what had been -- before recently -- a sense of abating existential risks that the Eurozone was facing. Now things look to be trending back in the other direction. Yesterday's breach and close below the 200-day moving average, presently at 1.1693, was, for technical analysts, a significant bearish signal. Trend resistance is at 1.1722-24.

    [USD, CAD]
    USD-CAD topped at one-week highs of 1.2915 into the North American open, with the modest rally coming in concert with slippage in WTI crude prices. Oil fell to $71.19 lows from over $72.00 following the surprise EIA reported U.S. inventory build. Generally, U.S. dollar firmness has been met by Loonie-supportive higher oil prices of late, which has been causing volatility in USD-CAD but little net directional bias. We expect more of the same for now.

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