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By XE Market Analysis May 26, 2020 2:53 pm
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    XE Market Analysis: Asia - May 26, 2020

    The Dollar fell broadly in N.Y. on Tuesday, taking the DXY to three-week lows of 98.96, down from overnight highs of 99.77. Unwinding of USD long safe-haven positions drove the the Greenback's move lower, as a strong bout of risk-on set in. The re-opening of the economy, along with positive news on the coronavirus vaccine front buoyed sentiment broadly. Incoming data had consumer confidence edge slightly, while new home sales handily beat expectations by rising. Wall Street surged to three-month highs, while Treasury yields headed higher. EUR-USD topped at four-session highs of 1.0992, up from near 1.0950 at the open. USD-JPY based at 107.40 early, down from 107.93 seen overnight, later bouncing over 107.65. USD-CAD fell to two-plus month lows of 1.3769, down from 1.3875 into the open. Cable recovered sharply from 1.2220 during the European morning session, though steadied in N.Y. between 1.2325, and 1.2360.

    [EUR, USD]
    EUR-USD rallied from Asian opening lows of 1.0892 to late morning highs of 1.0992, as the Dollar sold off broadly as risk-taking levels ramped up on hopes for the start of economic recovery, and encouraging news on the coronavirus vaccine front. The safe-have Greenback came under pressure early in Asia, as regional equity markets turned higher, and EUR-USD continued to advance through the N.Y. morning session, as Wall Street soared higher. EUR-USD will likely remain supported, should risk-on conditions remain in place, though the pairing has been unable to hold above the 1.1000 level for nearly two months, and may continue to struggle, as the 200-day moving average at 1.1013 provides a barrier.

    [USD, JPY]
    USD-JPY printed intra day lows of 107.40 in early N.Y. trade, down from overnight highs of 107.93. Despite the risk-on backdrop, the pairing remains on the down slope, as broad USD selling has picked up at the N.Y. open. Hopes for early economic recovery, along with positive news on the vaccine front have weighed on the Dollar, as safe-haven flows are reversed. USD-JPY remains inside of its one-week range of 108.09 to 107.32, and will need to break out from either side to shift overall market sentiment. The pairing managed to recover toward 107.70 into the London close.

    [GBP, USD]
    Cable advanced to a better than two-week high of 1.2363 in N.Y. morning trade, up from London lows of around 1.2215. Research out of Lloyds Bank in London suggests that, with the acute dislocations seen since in March now fading and markets regaining their posture, the pound's correlative link with global stock markets is weakening. We continue to anticipate limited potential for a sustained recovery in Sterling. UK markets are discounting negative repo rate by year-end, while there remains a risk that the UK leaves its post-Brexit transition membership of the EU's single market at year-end, which would put a large part of UK trade on much less favorable WTO terms.

    [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 fell to better than two-month lows of 1.3769 in early North American trade, with losses coming on the back of higher oil prices, and risk-on conditions, as hopes for economic recovery improve, and as positive news on vaccines is reported. The pairing is down from nearly 1.3990 after the close on Monday. Sell-stops are reported just under the psych 1.3800 level, with support then stepping in at the March 16 low of 1.3731. Resistance is at the 1.4000 level, which represents the 20-day moving average. Assuming risk appetite and oil prices hold up, USD-CAD looks destined to add to recent losses.

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