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By XE Market Analysis October 1, 2019 3:09 pm
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    XE Market Analysis: Asia - Oct 01, 2019

    The Dollar was higher in early N.Y. trade on Tuesday, leaving the DXY at a better than two-year peak of 99.67. Gains were not to last however, as a 10-year low U.S. manufacturing ISM took the wind out of the buck's sails in a hurry. The ISM fell to 10-year lows of 47.8, causing a broad Dollar sell-off, and sliding equities and yields. EUR-USD rallied to 1.0943 from 1.0885 lows, while USD-JPY slid to 107.63 from 108.45. USD-CAD rallied early on softer Canada GDP, though later fell under 1.3215, despite oil price weakness. Cable was choppy on reports the EU would consider a time-limited Irish backstop, taking the Pound to 1.2338. This was later denied, and Cabled fell back to 1.2260 lows.

    [EUR, USD]
    EUR-USD bottomed at fresh 28-month lows of 1.2879 in London, then bounced to 1.0908 highs into the N.Y. open. Early U.S. based selling interest took the pairing back to 1.0886, though the weaker manufacturing ISM prompted a modest short squeeze, resulting highs of 1.0943. The Euro has printed five-straight session of lower daily highs and lows, a bearish signal, and a failure to trade above Monday's 1.0948 highs today will likely embolden EUR bears going forward. Fundamentally, the U.S. economy remains head and shoulders above Europe's, while a dovish ECB and interest rate differentials solidly in favor of the Dollar, we look for further EUR-USD losses going forward.

    [USD, JPY]
    USD-JPY was on the rise in early N.Y. trade, peaking at 108.45, up from 108.23 into the open. U.S. equity futures were on the rise, providing some support , while overnight, a weak Japan Tankan report weighed on the Yen. The overnight two-week high of 108.47 high was left untested, as the weak U.S. manufacturing ISM tanked Wall Street, and pushed Treasury yields lower, resulting in a USD-JPY slide to 107.63 lows. Hopes for a breakthrough on trade when U.S. and China officials meet in Washington on October 10-11 may limit downside potential from here, though a failure to make progress can be expected to result in further losses.

    [GBP, USD]
    Sterling took a beating in London, with the latest push lower prompted by UK Prime Minister Johnson, who admitted that customs checks would be the "reality" of Brexit, even though he dismissed an apparent leak of his government's detailed plans for the post-Brexit Irish border -- which involve customs checks on both sides of the border -- as being inaccurate. Johnson had previously been promising that there would be no customs infrastructure on the border. Cable has hit a three-week low at 1.2207.After the London close, GBP-USD popped to near 1.2340 from 1.2240 following Bloomberg reports the EU have considered giving the U.K. a Brexit concession, by-time limiting the Irish backstop for the Irish border. U.K. PM Johnson has said all along he would not accept the backstop. Later, Cable pulled back from highs, as Bloomberg, cited a Buzzfeed tweet saying according to an EU Commission spokesman, the earlier report that the EU was considering a time-limited Irish backstop, was not true. Cable fell to 1.2260 from earlier highs near 1.2340.

    [USD, CHF]
    EUR-CHF found a toehold after five consecutive days of decline, which culminated in a three-week high being printed on Wednesday at 1.0885. The declines over the last week follow the SNB's quarterly policy announcement last week, which will be frustrating to Swiss policymakers given their chronic concerns of the franc's chronic state of overvaluation (which regularly tops the Economist magazine's Big Mac purchasing parity comparison of currencies). The 26-month seen in early September at 1.0811 has so far remained untroubled, but still looks vulnerable.

    [USD, CAD]
    USD-CAD rallied to seven-session highs of 1.3290 after the slight July Canada GDP miss. The pairing had been on the rise ahead of the open as WTI crude prices faded lower. Later, a big U.S. manufacturing ISM print took the USD broadly lower, seeing the pairing fall to 1.3215 before recovering toward 1.3240. Bigger picture, USD-CAD remains rangebound overall, largely trading between its 50-day moving average currently at 1.3245, and its 200-day moving average at 1.3297, give or take, for over two-weeks. USD-CAD has not closed above its 200-day moving average or below its 50-day in nearly a month.

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