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By XE Market Analysis November 18, 2020 2:55 pm
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    XE Market Analysis: Asia - Nov 18, 2020

    N.Y. FX trade was very quiet on Wednesday, with major Dollar pairings held to narrow ranges. The USD attempted to rally early on, though quickly turned modestly lower. The DXY topped at 92.45, later easing to a 92.27 low. Incoming U.S. data saw October housing starts rise more than forecast, though the outcome had little market impact. More positive Covid vaccine news helped Wall Street, as PZizer said its entry was 95% effective. In the meantime, rising cases in the U.S. as we enter the holiday season will likely keep enthusiasm hemmed in. EUR-USD traded from early lows of 1.1851 to 1.0877, while USD-JPY fell from 104.00 to 103.65. USD-CAD topped at 1.3099, later falling back to 1.3034 lows. GBP-USD advanced to 1.3312 from early lows of 1.3263.

    [EUR, USD]
    EUR-USD put in an inside day on Wednesday, ranging in N.Y. between 1.1851 and 1.1877. The USD continues to trade on a softer footing, with the DXY printing four-consecutive lower daily lows. Sharply higher Covid cases in the U.S. raise the possibility of a fizzling of the nascent economic recovery, a USD-negative, while the Fed lower for longer policy stance may hurt the Dollar as well in the coming months. As Fed Chair Powell noted yesterday, near term risks are to the downside due to the spike in the virus, hospitalizations, and deaths. EUR-USD's next upside target is the November 9 high of 1.1920.

    [USD, JPY]
    USD-JPY headed from 104.00 in early trade to 103.65, before recovering over 103.80. Yen trade was relatively subdued, as was the case with most major Dollar pairings. Inflows into Japanese equities has been noted of late, which has seen the Nikkei 225 print 29-year highs this week, boosting Yen demand from foreign investors. General USD sentiment appears to be souring, as the Fed's ZIRP and asset purchases could keep pressure on the Greenback in the coming months, especially should the economy recover more quickly due to the Covid vaccine rollout. The next USD-JPY support level comes at the November 9 low of 103.19.

    [GBP, USD]
    Cable printed a one-week high of 1.3312 in N.Y. morning trade, up from `.3263 at the open, and overnight lows of 1.3246. 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 or UK has blinked yet in trade talks. We expect that some sort of accord will be reached, and one potentially broader than is currently being anticipated in markets. This would spark a rally in the Pound should it materialize.

    [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 eased back under 1.0800 on Wednesday, with moderate risk-off conditions prevailing. 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. In addition, the cross will remain under pressure should the ECB embark on further easing in December.

    [USD, CAD]
    USD-CAD shrugged off the warmer Canada CPI figures early in the session, rallying from near 1.3880 to 1.3099 highs, since pulling back to 1.3072 lows. The CAD had firmed up in concert with modest oil price gains, with WTI holding near the $42.00 level. FX trade overall remains on the quiet side, with narrow ranges the rule so far this morning, and more of the same can be expected if current risk levels and oil prices continue on their current paths.

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