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By XE Market Analysis November 3, 2020 1:37 pm
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    XE Market Analysis: Asia - Nov 03, 2020

    The Dollar fell in N.Y. trade on Tuesday, taking the DXY to four-session lows of 93.29 from 93.64 at the open. Risk-on conditions saw safe-haven USD flows unwind pretty much across the board. Wall Street rallied sharply, with short covering a driver into the U.S. election results, which should hopefully be known sometime during the overnight U.S. hours. Intraday, the major indices were up better than 2.0%, reversing last week's sharp losses further. Treasury yields were lower. For Wednesday, election results will be front and center, though, with the surge in mail-in ballots seen this year due to the pandemic, it remains to be seen if a winner is called even by the end of day tomorrow. EUR-USD headed from 1.1698 to 1.1740. USD-JPY slipped to 104.43 from 104.80 into the open. USD-CAD fell from nearly 1.3160 to a 1.3104 base, while GBP-USD touched 1.3079 highs after opening near 1.2985.

    [EUR, USD]
    EUR-USD advanced from early Asian lows of 1.1637 to 1.1740 into the London close. General Dollar weakness was behind much of the move, as risk-on conditions weighed on the Greenback. The U.S. election results will likely have an impact on the USD overall, with a blue wave expected to support the unit in anticipation of massive stimulus from the Democrats, which would support Wall Street, bringing foreign capital into U.S. equities. From the Euro's perspective, further lockdowns, and another recession will likely limit potential EUR gains going forward.

    [USD, JPY]
    USD-JPY was under some modest pressure, falling to intraday lows of 104.43 at mid-morning from 104.80 ahead of the open. The Dollar has headed broadly lower through the session, seeing the DXY fall to four-session lows of 93.36, and down from Monday's close of 94.05. Sharp risk-on conditions have seen the safe-haven Dollar remain under pressure. Meanwhile, the risk-sensitive Yen has fallen against other currency peers, including the Euro, Pound, and AUD.

    [GBP, USD]
    Cable rallied through the London morning session, heading from lows under 1.2920 to 1.3011 at the N.Y. open, then later to 1.3070 into the London close. The rally came on general USD strength, and despite England heading into a one-month lockdown from this Thursday, which could be extended. Overall, the level of restriction is much less compared to lockdown one earlier in the year, so the economic impact will likely be less this time around, although this will depend on whether the lockdown is extended, or if restrictions are further increased. Importantly, the furlough wage support scheme has been extended, which will mitigate the economic impact, although at a large cost to future taxpayers.

    [USD, CHF]
    The Swiss franc has been trading with a firming bias, consistently rebounding from bouts of weakness in recent months and driving the EUR-CHF cross to levels under 1.0700 last week for the first time in three months. Markets are anticipating revamped monetary easing measures from the ECB while factoring in Brexit risk. The franc has a proclivity to ascend on the back of its balance of payments position. The SNB stated at its quarterly monetary policy review last month that the franc remains "highly valued" and said it is ready to "intervene more strongly in the foreign exchange market."

    [USD, CAD]
    USD-CAD continued its sharp retracement lower, very close to reversing all the gains seen last week. The pairing hit 1.3104 lows in early North American trade, down from 1.3233 seen in Asia, and 1.3390 highs printed last week. This week, the recovery in oil prices, coupled with risk-on conditions and a generally softer USD have combined to support the CAD. The next USD-CAD support level comes at the October 20 low of 1.3081, with the 20-day moving average at 1.3192 now marking initial resistance.

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