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By XE Market Analysis October 1, 2020 2:53 pm
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    XE Market Analysis: Asia - Oct 01, 2020

    The Dollar fell into the N.Y. open on Thursday, though later made up some ground following some pretty decent U.S. data. The DXY partially recovered from the eight-session lows of 93.533 seen into the open, later topping at 93.90. The ADP jobs report was considerably better than expected, while continuing jobless claims fell sharply, and construction spending bounced. Ahead of the open, risk-on conditions had weighed some on the USD, though the data appeared to to turn sentiment around some. Wall Street opened sharply higher on hopes for fresh U.S. fiscal stimulus, though pared gains as noises from D.C. indicated the two-sides were still not on the same page. Treasury yields were slightly higher. EUR-USD peaked at 1.1770, later falling to 1.1721 before settling in near 1.1750. USD-JPY was again range bound between 105.44 and 105.73, While USD-CAD eased to 1.3280 from 1.3322. GBP-USD was very volatile between 1.2829 and 1.2978.

    [EUR, USD]
    EUR-USD rallied to eight session highs of 1.1770 into the N.Y. open, stopping its gains just under the 20-day moving average at 1.1771. From there, a solid ADP jobs report, a modest decrease in initial jobless claims, a large drop in continuing claims, and a still firm manufacturing ISM gave some support to the Dollar, resulting in EUR-USD dropping to 1.1721 at mid-morning. Risk-on conditions though the session later saw paring of USD long positions, as haven positioning was unwound to a degree. This saw EUR-USD edge back over 1.1755. Looking ahead, the rise of European Covid cases, and the resulting new restrictions and lockdowns should limit the Euro's upside potential for now.

    [USD, JPY]
    USD-JPY was again relatively steady through the N.Y. session on Thursday, bottoming at 105.44 early in the session, and later peaking at 105.73 at mid-morning. The 50-day moving average, currently at 105.76 has capped the pairing since Tuesday. A failure to take out Wednesday's 105.80 high prompted some profit taking ahead of the London close, resulting in a move down to 105.52 lows. We continue to expect further consolidation between 105.00 and 106.00.

    [GBP, USD]
    Sterling underwent high volatility on starkly contrasting Brexit headlines, dropping back in the prevailing phase after Reuters cited EU sources saying that there no sign of reaching accordance on fisheries and level playing field rules. Earlier, GBP-USD rallied sharply after an FT report, citing UK officials with inside knowledge, asserted that the EU and UK have reached a compromise on the state aid issue. Before that, the pound had dropped sharply following another Reuters report, again citing EU sources, that the EU and UK are struggling on key issues in trade talks, specifically the issue of state aid. From London highs of 1.2940, the pairing dropped to 1.2820, then back up to 1.2978, before settling over 1.2870.

    [USD, CHF]
    EUR-CHF printed three-week highs of 1.0830 in N.Y. on Monday, though was unable to hold up, later falling to 107.75 lows. The pairing continues to struggle over the 1.0800 level, as it did again on Thursday. The SNB left policy setting unchanged last week, with the deposit rate and Libor target still at -0.75%. The central bank repeated that the franc is "highly valued" and said the bank is ready to "intervene more strongly in the foreign exchange market". The cross had been near 107.65 ahead of the Bank announcement Thursday, initially rallying to 1.0790, then later in N.Y. to its highs. Markets wonder if the SNB had a hand in the move over 1.0800.

    [USD, CAD]
    USD-CAD recovered some from the near two-week low of 1.3281 printed overnight, topping at 1.3322 in North American trade. The pairing's gains came as oil prices slid, with WTI crude trading at near three-week lows under $38.00, down nearly 6% from Wednesday's close and from the $40.45 highs seen in London morning dealings. The USD overall has bounced this morning from lows, which saw the DXY recover from eight-session lows of 93.53 to 93.90. The pairing later drifted lower to 1.3280, with some talk of profit taking after being unable to hold the 1.3400hande for over a week now. The spike in Covid cases in parts of Canada, namely in Quebec, should continue to weigh some on the CAD, at the margins at least.

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