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By XE Market Analysis May 29, 2020 3:27 pm
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    XE Market Analysis: Asia - May 29, 2020

    After falling to two-plus month lows of 97.95 overnight, the DXY recovered to 98.50 through the N.Y. session on Friday. It appeared that broad week and month-end buying was the main driver. For the data, the goods trade deficit widened, while personal income soared 10.5%, on government transfers (PPP). PCE plunged 12.6%, while Chicago PMI and Michigan sentiment dipped lower as well. As has been the case since the pandemic, though was little market reaction to the numbers. EUR-USD fell from two-month highs of 1.1145 after the open, later basing at 1.1081. USD-JPY opened at the lows at 107.09, before rallying to 107.89. USD-CAD topped at 1.3831 from opening levels under 1.715. Cable fell from 1.2394 highs to 1.2292 lows.

    [EUR, USD]
    EUR-USD topped at two-month highs of 1.1145 in early N.Y. trade, up from Asian session lows of 1.1070. The pairing's decisive break over its 200-day moving average (1.1012) saw follow through buying step in overnight. Hopes over the EU's bold budget and stimulus proposals helped to underpin the Euro as well, although the plans face tough negotiations and money is unlikely to flow soon. As the N.Y. session got under way, pre-weekend, and month end flows reversed quickly, which saw the Euro fall back to 1.1081 lows after the London close.

    [USD, JPY]
    USD-JPY recovered from two-week lows of 107.08 seen during the London morning session, bouncing over 107.89 after the London close. Month-end flows into the Dollar helped support through the morning session, though the pairing has run into resistance around 107.80, which marks the 50-day moving average. USD-JPY had been inside a relatively narrow range for over a week, as largely risk-on conditions weighed on both the Dollar and Yen. While still inside of May's trading range, today's bounce back to well-worn levels indicates that range trade may still be in effect.

    [GBP, USD]
    Cable fell through the N.Y. session, along with most other major currencies, largely driven by week and month-end Dollar buying. Cable had rallied through the London session, topping at 1.2394. The pairing later fell back to 1.2292 lows after the London close. Given the pandemic, and Brexit issues on trade going forward, we continue to see limited potential for a sustained recovery in Sterling.

    [USD, CHF]
    EUR-CHF eased back from near four-month highs of 1.0731, as risk-taking levels faded into month-end. 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 hit lows of 1.3713 in early North American trade, levels last seen on March 12. The move came on the back of general USD weakness, which saw the DXY fall to better than two-month lows of 97.95. Since then, ugly Canada Q1 GDP, along with broad USD buying saw the pairing rally back to 1.3831 highs, despite WTI crude climbing, and reclaiming the $34 handle.

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