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By XE Market Analysis November 20, 2020 2:28 pm
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    XE Market Analysis: Asia - Nov 20, 2020

    The Dollar bounced slightly through the N.Y. session on Friday, with pre-weekend short-covering driving much of the move, following a relatively soft performance through the week. The DXY topped at 92.42, after hitting 92.25 lows early in the session. There were no data to drive markets, and it appeared traders stayed close to the sidelines ahead of the upcoming Thanksgiving abbreviated week. Wall Street was mostly lower, though stay at home stocks supported the tech-heavy NASDAQ. Markets continued to walk the tightrope between rising Covid infection and death rates, and hopes for a sooner rather than later rescue on the vaccine front. The economic outlook remains cloudy, though hopes are that the globe will begin to turn the corner at the start of the New Year when vaccines become available. Treasury yields were mixed. EUR-USD ranged between 1.1876 and 1.1850, while USD-JPY rallied from 103.70 to 103.86. USD-CAD bottomed at 1.3039 after better Canada retail sales, later peaking at 1.3090 on short-covering activity. GBP-USD rallied early to 1.3296 highs, later easing under 1.3270.

    [EUR, USD]
    EUR-USD ranged between 1.1814 and 1.1894 through the entire week, with the FX market overall largely in a lull, though on a generally softer footing. EUR-USD was confined to a 1.1876 to 1.1850 trading band in N.Y. on Friday, with a bit of pre-weekend selling noted into the London close. The lack of progress between the EU and U.K. on Brexit trade talks has likely kept a cap on the Euro, despite generally waning USD sentiment. EUR-USD has remained under highs of the week seen Tuesday and Wednesday, with the 1.1900 level appearing to have become solid resistance. Support comes at the 50-day moving average, which currently sits at 1.1775.

    [USD, JPY]
    USD-JPY held above Wednesday's one-week low of 103.65, trading to 103.70 early in the session, before bouncing slightly to 103.86. The pairing headed lower on a daily basis since last week, only consolidating some since Thursday. USD sentiment has soured some most recently, as the Fed's ZIRP policy and asset purchase program could keep pressure on the Greenback in the coming months. On the Yen side, Japan's core inflation fell to -0.7% y/y, which will cause an unwanted tightening in real interest rates in Japan, and likely keep USD-JPY capped for now.

    [GBP, USD]
    Cable dipped to 1.3258 lows in early N.Y., down from London highs of 1.3293. The pairing later topped at 1.3297 in a lackluster trading session. Trade talks between the EU and UK commenced via video conference after one of the EU's team tested positive for Covid. The next in a series of deadlines that have so far come and gone, now appears to be mid next week. Fishing rights and level playing field rules remain the stumbling blocks between the EU and UK, and neither side is showing any sign of wanting to make the first move in the concessions game.

    [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 steadied just over the 1.0800 mark on Friday, 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 fell from nearly 1.3060 to 1.3039 in the aftermath of the better Canada retail sales outcome. In addition, a generally weaker USD, along with continuing relatively firm crude oil prices supported the CAD. USD sentiment has soured of late, with market narratives calling for more downside in the New Year, with further easing by the Fed in the form of additional asset purchases likely to weigh on the USD. Into the weekend however, short covering prevailed, taking USD-CAD back to 1.3090 in afternoon trade.

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