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By XE Market Analysis October 8, 2019 1:51 pm
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    XE Market Analysis: Asia - Oct 08, 2019

    The Dollar index rallied to one-week highs in N.Y. on Tuesday, topping at 99.21, and up from 98.86 lows seen immediately following the much cooler than expected U.S. PPI outcome. Safe-haven flows into the USD stepped up following the U.S. blacklisting several Chinese tech companies, blamed for facilitating human rights abuses in China's Xinjiang region. This development ramped up fears that this week's U.S.-China trade talks will be negatively impacted, with Chinese officials saying the high-level talks set for Thursday and Friday, may be cut to just one day. Wall Street slid, while Treasury yields headed lower. EUR-USD fell from over 1.0990 at the open to 1.0945 lows. USD-JPY bounced slightly from the 106.80 lows seen into the open, topping over 107.20 as Wall Street pared losses in afternoon trade. USD-CAD peaked at 1.336, while Cable bottomed at .12195 on renewed Brexit concerns. The Dollar briefly blipped a little lower on Powell's speech late in the session, where he said nothing new, but did not fight the market's expectations for a 25 bp October rate cut.

    [EUR, USD]
    EUR-USD pulled back to 1.0945 lows into the London close, after failing to decisively take out the key 1.1000 level over the past four sessions. U.S. based accounts were sellers from near the open, stepping in over 1.0990. The overnight news of U.S. blacklisting Chinese companies, and the impact that may have on trade talks currently under way in Washington was a likely driver of the USD gains seen. Safe-haven flows into Dollars and Treasuries were noted. Last Thursday's 1.0940 low is the near term downside target, followed by Wednesday's 1.0904 bottom.

    [USD, JPY]
    USD-JPY has recovered from intra day lows of 106.80, peaking at 107.15, and reportedly running buy-stops just over the 107 mark. The pairing had been under some pressure on the back of renewed uncertainty over this week's U.S./China trade talks, which may be impacted following the U.S. blacklisting of a number of Chinese tech companies. Barring unexpected events, the risk-off backdrop in place today will likely limit further USD-JPY gains into the close.

    [GBP, USD]
    Cable was crushed to one-month low of 1.2195 in N.Y. morning trade, down from London highs over 1.2300. The BBC cited a UK government source saying that Germany's Merkel conveyed to PM Johnson that a deal based on his government's proposals was "overwhelmingly unlikely.". The development makes it a near certainty that Johnson won't have a deal by the October-19 deadline set out in the newly created parliamentary bill that would require the prime minister to ask the EU for an extension in Brexit to January 31.

    [USD, CHF]
    EUR-CHF fell to one-week lows of 1.0872 in N.Y. on Tuesday, with the Franc picking up safe-haven ground on the back of broadly risk-off conditions. Renewed Brexit concerns, and signs that the high-level U.S./China trade talks set for Thursday and Friday may be strained following the U.S. blacklisting of several Chinese tech companies, blamed for facilitating human rights abuses in China's Xinjiang region.

    [USD, CAD]
    USD-CAD pulled back slightly from pre-open highs of 1.3326, bottoming at 1.3305 in early North American trade. Risk-off conditions today, along with soggy oil prices have limited downside, as U.S./China trade fears rise, and as WTI crude trades down near the $52/bbl mark. The 200-day moving average, currently at 1.3289 continues to provide support, while last week's one-month high of 1.3348 is the next upside target. The pairing topped at 1.3336 in late trade.

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