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By XE Market Analysis October 6, 2020 3:00 pm
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    XE Market Analysis: Asia - Oct 06, 2020

    The Dollar ended higher in N.Y. trade on Tuesday, though ranges overall were relatively narrow. The DXY bounced modestly from the two-plus week low of 93.35 seen early in the session, to 93.64 during the afternoon session, after Trump said there would be no stimulus package until after the election. Risk-taking levels took a dive from there, allowing the USD to rally. Fed Chair Powell's speech on the economy didn't reveal anything particularly new, though he did say there is risk the rebound could slow and turn into a longer "slog." He is also worried about rising virus cases and the potential for permanent job losses. The comments saw stocks initially fall, though some recovery came through much of the session, until Trump's stimulus tweet The major indices dropped precipitously from there. The NASDAQ was the underperformer, falling over 1.7% into the close. Ongoing concerns could keep volatility levels elevated. The only data release was the August trade report, which revealed the highest deficit in 14-years. The outcome had little impact on markets. EUR-USD made its way from 1.1807 to 1.1735 lows late in the day, as USD-JPY had remained range bound between 105.58 and 105.71, though fell to lows of 105.50 after Trump. USD-CAD bottomed early at 1.3247, later bouncing to 1.3317 highs. GBP-USD topped at 1.2986 before easing to 1.2890 lows.

    [EUR, USD]
    EUR-USD pulled back from the better than two-week high of 1.1807, later bottoming at 1.1772 after the London close. Sellers emerged over the 50-day moving average at 1.1803, with profit taking driving some of the Euro selling. In addition, a wobbly risk-backdrop has given the Greenback some some support as well, seeing the USD recently posting modest gains versus the Pound, CAD and JPY. Trump's late tweet on no stimulus until after the election took EUR-USD to 1.1735 lows.

    [USD, JPY]
    USD-JPY has been stuck inside a 105.71 to 105.59 trading band since the N.Y. open, finding sellers near the 105.76 50-day moving average. The pairing is currently near session lows, but without fresh market moving events, we look for narrow trading bands to persist. Recently, both currencies have tended to move in the same direction on shifting risk taking levels. The 105.00 to 106.00 trading band can be expected to hold up for now. The pairing printed 105.50 lows, down from 105.65 following Trump tweets on stimulus.

    [GBP, USD]
    Cable was choppy through the N.Y. session, hitting 1.2915 lows into the open, rallying to 1.2986 before heading back to 1.2930 after the London close. The Brexit endgame is now in play. The next couple of weeks will be the most intensive phase yet in negotiations given the fast-approaching deadline, which is essentially the October 15th-16th EU summit. The BBC's Europe editor, Kate Adler, reported last week that EU diplomats are hoping that "guiding principles" in place of strict adherence to level playing field rules may be the route to compromise. But a no-deal scenario cannot be entirely ruled out. As such, the Pound is liable to remain jittery for now. Cable slipped to 1.2890 late, on Trump's stimulus news.

    [USD, CHF]
    EUR-CHF remained under 1.0800 in N.Y on Tuesday, bottoming at 1.0773, later rallying to 1.0788 in N.Y. From there, risk off returned following Trump's tweet calling off U.S. stimulus talks until after the election. This took the pairing to 1.0770 lows. The SNB remains committed to limiting gains in the franc. At its quarterly monetary policy review last month, it stated that the franc remains "highly valued" and said it is ready to "intervene more strongly in the foreign exchange market". The cross has repeatedly failed to sustain gains above 1.0800 over the last couple of months, even though influence of the SNB's intervening hand may have been at play during the recent upside bursts.

    [USD, CAD]
    USD-CAD dipped to 1.3248 lows into the Canada trade data, though showed little reaction to the data, which revealed a deficit fairly close to expectations. The surge in oil prices have kept pressure on USD-CAD, which overnight printed a two-week low of 1.3242. Support comes at 1.3240, which is the 50-day moving average, and a break there will open the door for a test of 1.3200, then the September 21 low of 1.3171. That was not to be the case on Tuesday however, as Trumps' tweet on no stimulus until after the election took USD-CAD to 1.3317.

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