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By XE Market Analysis May 30, 2019 3:14 pm
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    XE Market Analysis: Asia - May 30, 2019

    The Dollar index rallied to six-session highs of 98.28 in morning N.Y. trade on Thursday, though later pulled back to 98.11 lows into the London close. A slightly better than expected Q1 GDP revision helped the USD early on, though with Wall Street posting modest gains, safe-haven Dollar flows reversed to an extent. EUR-USD printed six-session lows of 1.1116, while USD-JPY made a run for the 110.00 level, though failed and headed lower from there. Cable posted near five-month lows of 1.2580 on Brexit uncertainty, while USD-CAD maintained altitude over 1.35 on softer oil prices.

    [EUR, USD]
    EUR-USD printed six-session lows of 1.1116, coming from 1.1140 highs seen into the N.Y. open. The Euro has remained in sell-the-rally mode this week, posting it fourth straight day of declines. EU elections, which saw populists and nationalists do better has weighed. In addition, the European commission's scolding of Italy and its debt levels has kept an offered tone to the EUR. Support comes at 1.1107, the two-year low seen on May 23.

    [USD, JPY]
    USD-JPY ran out of steam over 109.90, after rallying from near 109.60 early in the session. The pairing has since fallen back under 109.60, taking its cue from Wall Street, which has about squandered all of its earlier gains. The usual talk of Japan exporter offers from the 110.00 mark has been heard, which could have prompted some position squaring ahead of the level. In the bigger picture, trade wars and general risk-off conditions will likely limit further gains going forward.

    [GBP, USD]
    Cable fell to near five-month lows of 1.2580 into the London close, posting three-straighr sessions of lower daily highs and lows in the process. It's gone quiet on the Brexit front in terms of substantive developments, with the Conservative Party presently seeing a lot of jostling for position of candidates to replace Prime Minister May, who will step down at the end of next week (after President Trump's state visit). The leadership contest will formerly commence on the week of June 10th. The new prime minister will almost certainly be either a person in favor of a hard, no-deal-if-necessary Brexit, or someone in favour only of a Brexit with a deal, such as Michael Gove, who asserts that leaving the EU without a deal on divorcing terms and outline for a future trading relationship would be irresponsible. Most likely it will be someone of the former type, Boris Johnson being the favourite, which should keep the Pound's upside potential in check.

    [USD, CHF]
    EUR-CHF steadied in the low 1.1200s in N.Y., as risk taking levels steadied some. The punitive -0.75% overnight deposit rate is evidently not sufficient to deter the Swiss currency from still being seen as a safe haven, as trade and geopolitical concerns remain. The SNB's Alternate Governing Board Member Moser said recently that in his view "if we had higher interest rates then we would have a stronger exchange rate", which something the central bank is ever 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.

    [USD, CAD]
    USD-CAD found support under 1.3490 early in the session, later bouncing to 1.3517 highs as oil prices fell to fresh two-plus month lows. WTI crude bottomed at $56.78, down from opening highs near $59.20. Wednesday's post-BoC high of 1.3546 remains the next resistance level, with support now at 1.3481, which was yesterday's low.

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