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By XE Market Analysis November 17, 2020 2:54 pm
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    XE Market Analysis: Asia - Nov 17, 2020

    The Dollar firmed slightly in N.Y. on Tuesday, though narrow ranges were in place for most pairings. The DXY edged up from seven-session lows of 92.27, later peaking at 92.49. Incoming U.S. data was generally supportive, as retail sales missed forecasts, though large upward revisions from August offset, while industrial production was a bit better than consensus. Wall Street opened lower on profit-taking activity following Monday's record highs. The major indices later pared losses into the close. Safe-haven flows into Treasuries saw yields ease. EUR-USD fell from 1.1894 to 1.1857, while USD-JPY bounced from 104.07 to 104.25, after coming from overnight highs of 104.57. USD-CAD headed from 1.3064 to 1.3117, while GBP-USD eased from over 1.3270 to 1.3240. Wednesday's U.S. calendar features October housing starts, while the Treasury auctions 20-year bonds.

    [EUR, USD]
    EUR-USD opened the session near 1.1870, later topping out at 1.1894, before easing to 1.1858 lows at mod-morning. The pairing remains near the middle of its recent trading band. The jury is out in the near-term on EUR-USD direction, with moves, for the most part, continuing to be driven by risk-taking levels. Bigger picture, this dynamic may change as vaccine distribution gets underway over the next few months. The recent market narrative has called for a lower USD in the new year, as the Fed remains in uber-easing mode, and as U.S. equity valuations remain high relative to the rest of the world, liable to lead to USD outflows once economies begin to recover in earnest.

    [USD, JPY]
    USD-JPY touched seven-session lows of 104.07 in N.Y. trade, down from 105.13 highs seen on Monday following the Moderna vaccine news. Risk-off conditions have prevailed this morning, which has broadly supported the risk-sensitive Yen. In addition, inflows into Japan equities has been noted of late, seeing the Nikkei 225 print 29-year highs overnight, boosting Yen demand from foreign investors. The next USD-JPY support level comes at the psych 104.00 mark with resistance up at 104.60, which represents the 20-day moving average.

    [GBP, USD]
    Cable rallied from 1.3193 to 1.3273 into the N.Y. open, a one week high. The pairing then steadied through the session, between 1.3269 and 1.3240. The Brexit endgame drama is now reaching a climax. There is a lot of noise coming from officials and politicians, yet little response in the pound, with participants uncommitted, waiting on concrete developments. Neither the EU nor UK has blinked yet in trade talks. The UK's trade negotiator Frost said that a deal could be reached by next Tuesday, while an EU diplomat cited in the Sun tabloid said chiefs are working to avoid an "accidental no deal."

    [USD, CHF]
    EUR-CHF rallied to seven-week highs of 1.0828 in N.Y. on Monday, on the back of the Moderna vaccine news, which saw risk-taking levels surge, putting downward pressure on the haven CHF. The cross later eased back into the 1.0800 mark. EUR-CHF has struggled to hold the 1.0800 level since the summer, and will likely remain altitude limited going forward unless the risk-backdrop holds up. The pairing headed back over 1.0800 on Friday, as stocks rallied. In addition, the cross will remain under pressure should the ECB embark on further easing in December.

    [USD, CAD]
    USD-CAD rallied to 1.3117 highs in early North America, up from overnight lows of 1.3064. Weaker oil prices and the return of risk-off conditions supported. WTI crude was down over $1.50/bbl from Monday's high, hitting a low of $40.59, while equities remained mostly underwater. Oil later recovered some to over $41.00, which saw USD-CAD dip back under 1.3090. Risk levels and oil prices continue to drive USD-CAD direction.

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