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By XE Market Analysis November 4, 2020 3:08 pm
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    XE Market Analysis: Asia - Nov 04, 2020

    The Dollar shot higher overnight, as election uncertainty saw a rush into the safe-haven USD. Later, as risk appetite exploded, the USD fell back. The DXY moved from Asian lows of 93.38 to a high of 94.30 before falling back to 93.26 in early N.Y. trade. FX trade is likely to remain choppy until the final election results are known. Wall Street surged higher on prospects for a gridlocked Congress, while Treasury yields headed sharply lower. Incoming data saw the ADP employment survey miss expectations by a wide margin, while the trade deficit narrowed a bit more than expected. The services ISM was softer than expected as well. Given the election backdrop, none of the data had much market impact. In N.Y., EUR-USD chopped between 1.1745 and 1.1680, while USD-JPY ranged between 104.15 and 104.62. USD-CAD touched a low of 1.3109 from early highs of 1.3200, while GBP-USD fell from 1.3050 to 1.2950, later steadying on either side of 1.3300.

    [EUR, USD]
    EUR-USD rallied to 1.1746 into the N.Y. open, up from overnight three-plus month lows of 1.1603. U.S. election uncertainty resulted in some very choppy USD moves. The pairing steadied some through the U.S. session, trading between 1.1680 and 1.1734. Dollar gains overnight came as the closer than expected election prompted risk-off conditions, though as U.S. equity futures soared, the USD was pushed lower again. Market chop can be expected until the final election tallies are known.

    [USD, JPY]
    USD-JPY fell from two-week highs of 105.35 seen in Asia to 104.15 into the N.Y. open, since idling between 104.25 and 104.60. Election uncertainty has resulted in choppy trade overall, though the huge surge on Wall Street and general risk-on conditions have weighed on the Dollar broadly. Stocks are higher largely on the prospects for a split Congress. USD-JPY support is at 104.12, the October 29 low.

    [GBP, USD]
    Cable tumbled from 1.3140 highs seen in Asia to 1.2915 lows in London morning trade. U.S. election jitters and a later move to risk on conditions resulted in sharp swings. N.Y. trade was choppy as well, though ranges were hrld to 1.3050 and 1.2950. The BoE's MPC meets Thursday and is expected to expand its asset purchase program by 100 bln pounds. Given the fast-changing realities, the possibility of the BoE taking the repo interest rate negative is also up, and the central bank should at the least raise the emphasis of negative rates as being a policy option rather than just a contingency plan.

    [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 traded to fresh two-week lows of 1.3109, down from overnight highs of 1.3300, as oil prices rose to one-week highs over $38.80. The pairing printed its highs during the London morning session as WTI crude prices hit session lows of $37.27. The risk backdrop and oil prices continue to drive CAD direction, and this morning, the combination of surging Wall Street and firm oil prices have supported the CAD. The next USD-CAD support level is at the October 20 low of 1.3081.

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