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By XE Market Analysis November 7, 2019 3:06 pm
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    XE Market Analysis: Asia - Nov 07, 2019

    The DXY rallied to better than three-week highs in N.Y. on Thursday, heading from pre-open lows of 97.82, to a mid-day peak of 98.23. Progress on the trade war front was a driver, as both the U.S. and China apparently agreed to roll-back tariffs over a yet unspecified period of time. Wall Street rallied to fresh record highs, while sharply higher Treasury yields supported the Dollar as well. EUR-USD hit a three-week low of 1.1036, trading briefly under qts 50-day moving average, as USD-JPY surged to a five-month high of 109.49 on heightened risk taking levels. USD-CAD headed up from 1.3162 lows, topping at 1.3189. Cable meanwhile, steadied in the low 1.2800s. Generally, progress on trade, and a Goldilocks U.S. economy should continue to support the USD.

    [EUR, USD]
    EUR-USD printed better than three-week lows of 1.1036, ticking briefly under its 50-day moving average of 1.1038 before recovering slightly. An outperforming U.S. economy continues to weigh on the pairing, and we expect further losses going forward, as the Euro remain mired in a long term downtrend. A decisive break of the 50-day MA will likely see the 1.1000 mark targeted. Under there, the 28 month low of 1.0879 seen on October 1 comes into focus.

    [USD, JPY]
    USD-JPY headed up to highs of 109.39 in N.Y. morning trade, adding to overnight gains which came on reports of somewhat of a breakthrough in the U.S./China trade dispute. Both sides have apparently agreed to roll-back tariffs over a yet unspecified period of time. Equities and Treasury yields spiked higher, supporting the risk-sensitive USD-JPY. The pairing later rallied through key levels including the Tuesday high of 109.25, and the October 30 peak of 109.28, printing better than five-month highs of 109.49 after the London close.

    [GBP, USD]
    Cable fell following the BoE's announcement, which showed two of the nine members of the MPC dissented in favour for cutting the repo rate by 25 bps. This was not too much of a surprise, but was accompanied with the central bank trimming both growth and inflation forecasts in its quarterly Inflation Report. GBP-USD printed a better than two-week low of low at 1.2794. The pairing later bounced to 1.2832 before stabilizing. BoE Governor Carney during his press conference went through the risks on the global front, the sustainability of global supply chains as trade protectionism becomes more pervasive etc, but concluded by saying that "on balance we think the economy is stabilizing." Overall, much of the BoE's messaging was pretty predictable, and this has not been a bearish inflection point for the pound. Focus now shifts back to the upcoming election.

    [USD, CHF]
    EUR-CHF bounced back from three-week lows of 1.0975, topping at 1.1013, following apparent progress on the U.S./China trade war. The pairing remains relatively buoyant overall, lifted recently by the diminishing in no-deal Brexit risks, which has been generally supportive of the euro. The cross last week printed a two-and-a-half-month high at 1.1059 and besides the early part of this week, has largely remained over 1.1000 of late.

    [USD, CAD]
    USD-CAD topped at seven-session highs of 1.3197 in Asian trade, later dropping to 1.3160 into the North American open, since rallying back to 1.3180 on Canadian name buying. Solid risk on conditions following positive U.S./China trade news supported the CAD to a degree, though market talk continues to focus on the BoC, and the potential for a rate cut as soon as December, following weak trade data seen last week. Resistance comes between the psych 1.3200 level, and the 50-day moving average at 1.3212. Buy-stops are expected from 1.3215.

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