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By XE Market Analysis October 2, 2019 3:11 pm
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    XE Market Analysis: Asia - Oct 02, 2019

    The Dollar pulled back in N.Y. on Wednesday, taking the DXY to 98.96 lows from 99.41 into the U.S. open. Recession fears following weak manufacturing ISM on Tuesday and not exactly stellar ADP jobs report saw stocks, Treasury yields, and the USD all take a trip lower. EUR-USD managed one-week highs of 1.0964, as USD-JPY succumbed to the risk-off backdrop, falling to lows of 107.04 from 107.60 at the open. USD-CAD bucked the trend in rallying to 1.3315 highs, as WTI crude was crushed. Cable recovered from pre-open lows of 1.2227, rallying to near 1.2325 into the London close.

    [EUR, USD]
    EUR-USD printed one-week highs of 1.0964 after opening at 1.0920, up from Tuesday's trend low of 1.0879. The Euro's move higher appears to be more of a case of Dollar weakness than Euro strength following the weak U.S. manufacturing ISM on Tuesday, and the not overly impressive ADP jobs report this morning. U.S. recession fears have been on the rise again, resulting in lower Treasury yields. Traders will likely hold fire into the end of the week, to see how the services ISM on Thursday, and the September employment report on Friday play out. EUR-USD resistance is now at 1.1000.

    [USD, JPY]
    USD-JPY fell to six-session lows of 107.05, down from opening highs of 107.60. The pairing has so far found support ahead of the 50-day moving average at 107.05, though today's severe risk-off conditions, including a sharp Wall Street sell-off, and lower Treasury yields, should keep Dollar gains contained. U.S./China trade uncertainty can be expected to limit upside as well. The pairing has been inside a 108.50 to 107.00 trading range for nearly a month, and will need a decisive break of either of those levels to see a shift in sentiment. For now, given all the uncertainties facing the markets, we look for the risk sensitive pairing to test downside support.

    [GBP, USD]
    Cable pared losses seen during the London morning session, bottoming at 1.2227, then making its way to near 1.2325 into the London close. PM Johnson gave a keynote address before his party's annual conference, which was notable for being less bombastic than most onlookers had expected but didn't tell us anything we didn't already know with regard to Brexit. The government's detailed Brexit proposals have now been sent to the top brass at the EU, and what's clear, without yet knowing what the precise details are, is that the plan leans heavily on technological solutions to achieve the aim of ensuring that there is no hard border between Ireland and Northern Ireland and that the integrity of the single market is maintained. This is something that the EU, particularly Ireland, has been sceptical of, although officials have promised to look at Johnson's proposals with an open mind. The mess is not yet over.

    [USD, CHF]
    EUR-CHF trade to near two-week highs in N.Y. on Wednesday, aides by a firmer EUR-USD. 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 got a boost from the morning WTI crude sell-off, rallying to 1.3300, as oil prices fall sharply, to under $52.20. The contract had topped at $54.41 overnight. General risk-off conditions weighed on the CAD as well. In addition, U.S. recession fears have picked up following the weak U.S. manufacturing ISM on Tuesday, and the not-so-terrific ADP jobs report, leading to market thinking that a downturn South of the border will have negative impact on Canada's economy, likely to weigh further on the Loonie. The pairing later topped at 1.3315, a one-month high, and above its 1.3295 200-day moving average. The next upside target is the September 4 high of 1.3345.

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