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By XE Market Analysis May 28, 2020 2:56 pm
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    XE Market Analysis: Asia - May 28, 2020

    The Dollar fell for the third straight session, leaving the DXY at two-month lows of 98.37, down from 99.97 highs seen on Monday. An improving outlook for reopening the economy amid general risk-on conditions, has continued to see safe-haven USD positions unwind. Wall Street was higher, with Treasury yields a bit lower on the back of U.S./China tensions. Incoming data was horrible, though largely in-line with expectations, with the modest drop in jobless claims appearing to help equity market sentiment. EUR-USD ran up to two-month highs of 1.1090 from opening lows of 1.1010. USD-JPY was range bound, slipping from opening highs of 107.82 to a low of 107.57. USD-CAD was choppy between 1.3785 and 1.3744. Cable meanwhile rallied to 1.2343 after the London close from opening lows of 1.2255.

    [EUR, USD]
    EUR-USD rose steadily through the N.Y. open, printing fresh two-month highs of 1.1090 after the London close, and up from 1.1010 at the open. The pairing traded on either side of its 200-day moving average (1.1012) overnight, before breaking higher this morning. Risk-on conditions have weighed on the Dollar again on Thursday, as U.S. and European stocks hold on to gains. Aside from USD weakness, Euro strength has been a factor, as signs that a deal on the EU recovery fund can be agreed to. This said, negotiations are likely to be contentious, and it may be a matter of weeks before stimulus is sent out the door.

    [USD, JPY]
    USD-JPY failed to break above the 108.00 level for the third day running, peaking at 107.90 in Asia, then making its way from early N.Y. highs of 107.82, to late morning lows of 107.57. The 50-day moving average at 107.85 has acted as a soft cap to the pairing for more than a week. While risk-on conditions through much of this week have limited the pairing's downside, unwinding of safe-haven USD positions, which has been in favor for a week now, has limited USD-JPY gains, offsetting the risk-sensitive Yen's downside. As a result, the pairing has been stuck inside a 107.32 to 107.96 trading range for better than a week.

    [GBP, USD]
    Cable firmed to 1.2343 highs after the London close, extending a recovery from yesterday's low at 1.2205. Risk-on conditions, along with a generally weaker Dollar have seen the Pound with a bid tone this week, though Cable was unable to surpass Wednesday's 1.2355 high. Cable looks to be in a consolidation mode, after printing two-session of lower daily highs, and higher daily lows. In addition, the pairing has traded either side of both its 20- and 50-day moving averages Since Tuesday, another indication of consolidation. Cable has continued to correlate with general risk levels, so, should equities continue to advance, Cable risk would appear to be to the upside.

    [USD, CHF]
    EUR-CHF remained firm on Thursday, after rallying to near three-month highs of 1.0698 on Wednesday. Another risk-on session kept a floor under the cross. 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 found support above 1.3730 overnight, failing to break below the 11-week low of 1.3725 seen on Wednesday. The pairing topped at 1.3789 into the North American open, and has since ranged between 1.3785 and 1.3744. The pairing was lifted from 1.3745 to over 1.3780 following the large WTI crude inventory build, though as oil later rallied, USD-CAD headed back toward its low. Overall, a choppy inside day, as prices consolidate after the sharp USD-CAD drop on Tuesday, and ahead of Friday's Canada GDP report.

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