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By XE Market Analysis November 24, 2020 2:33 pm
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    XE Market Analysis: Asia - Nov 24, 2020

    The Dollar ran higher into the N.Y. open and beyond on Tuesday, taking the DXY from 92.19 to 92.55. The USD advanced versus all the major currencies, seemingly on the back of the formal start to the transition to a Biden presidency. Gains were later partly reversed, perhaps as risk-taking levels surged. The DJIA headed over the 30k mark for the first time, as Wall Street rallied sharply. While the good news on vaccine developments has underpinned gains amid as quicker than expected return to normalcy. Additionally, the pick of Janet Yellen, a very well known quantity for Treasury Secretary, calmed fears of a more radical pick. It's also expected that the Biden administration and Yellen will argue for additional fiscal stimulus, which would be supportive of further stock and USD gains.

    [EUR, USD]
    EUR-USD put in a choppy session, rising from near 1.1845 to 1.1895 in London morning trade, before falling to 1.1841 in early N.Y.. From there, the pairing bounced to 1.1885, then settled under 1.1870. The formal start of the transition to a Biden presidency improved USD sentiment, as did the appointment of Yellen to Biden's Treasury Secretary post, which calmed fears of a more radical pick, and upped the expectations that the Biden administration and Yellen will argue for additional fiscal stimulus, positive for Wall Street and the USD. EUR-USD has largely consolidated November's modest gains, with the 1.1900 level remaining as solid resistance.

    [USD, JPY]
    USD-JPY rallied to seven-session highs of 104.76, up from 104.55 at the open, and overnight lows of 104.15. Dollar demand was a feature since London morning trade, seeing the greenback lifted against most major currencies. The start of the formal transition period to a Biden presidency appears to have given USD sentiment a boost, while hopes for a robust U.S. economic recovery in 2021, once Covid vaccines are rolled out appears to have helped the USD for now at least. USD-JPY support is at the 20-day moving average of 104.47, with resistance at the 50-day moving average at 104.95.

    [GBP, USD]
    After rallying to 1.3380 in London morning trade, Cable fell to 1.3293 in early N.Y., as a broad round of Dollar buying hit the market. The pairing later recovered to 1.3360 highs. EU and UK negotiating teams have been continuing discussions by video conference, with the deadline for reaching agreement, is reportedly now next Tuesday. Heads of state are now fully engaged. We fully expect that win-win will prevail, with both sides evidently striving to a avoid no-deal, even if it means some kind of fudged extension. JPMorgan analysts are less confident, but still give 80/20 odds for a deal, up from 66% odds for a deal they previously envisioned. France is the main 'bad cop' protagonist on the EU side, along with Spain to a lesser extent, which has a special interest about Gibraltar, threatening on numerous occasions to veto any deal if it doesn't get what it wants on fishing rights. The most likely outcome is a narrow trade deal.

    [USD, CHF]
    EUR-CHF rallied to near three-month highs of 1.0850 in N.Y. on Tuesday, on the back of a surge in risk-taking levels, putting downward pressure on the haven CHF. Positive Covid vaccine news, along with the formal start of the transition to a Biden presidency, turned sentiment higher. 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 bounced from two week lows of 1.3010, trading to 1.3091 highs in early North American trade. The overnight move to the lows came as oil prices hit three-month highs, though broad USD buying stepped in ahead of the open, prompted by the formal start of the transition to a Biden presidency, and a market looking ahead to 2021, when vaccines should put an end to the pandemic. USD-CAD later did an about-face from early gains, retracing to 1.3018 lows in early afternoon. Oil prices advanced further, taking WTI crude over the key $45 level, while surging equities and general risk-on conditions supported the CAD as well. The overnight low of 1.3010 now marks support.

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