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By XE Market Analysis October 8, 2020 2:33 pm
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    XE Market Analysis: Asia - Oct 08, 2020

    After heading slightly higher following the steady initial jobless claims and large drop in continuing claims, the Dollar pulled back some through the morning session. The DXY peaked at 93.77 early, later slipping to 93.59 lows. USD-major trading ranges remained relatively narrow. Wall Street stumbled after speaker Pelosi said she would not accept targeted stimulus(airlines, small business, stimulus checks) without a broader (bigger) relief package. The two sides had been negotiating airline aid and other stand alone initiatives. Stocks ultimately regained some poise, trading moderately higher through the remainder of the session. Treasury yields edged lower. EUR-USD bottomed at 1.1734 from opening highs of 1.1769, later climbing toward 1.1760. USD-JPY traded a miniscule range between 105.94 and 106.04, while USD-CAD fell to three-week lows just under 1.3200 from over 1.3250, as oil prices rose. GBP-USD opened at 1.2900 lows, later topping at 1.2949 into the London close. Friday's economic calendar is light, with just August wholesale figures due.

    [EUR, USD]
    EUR-USD dipped from 1.1769 early highs to 1.1733 lows in the aftermath of the large drop in continuing jobless claims, steadied near lows through late morning, before heading back to 1.1758 highs into the London close. Modest risk-on conditions have generally weighed on the USD since mid-morning. Bigger picture, EUR-USD continues to grind away inside the relatively narrow range of about 1.1700 to 1.1800 it has seen for the past two-weeks, and will need news or an event to result in a break out for now.

    [USD, JPY]
    USD-JPY matched Wednesday's near four-week high of 106.11 overnight, though has moved inside a very narrow range since. From the N.Y. open, the pairing has managed a thin 106.04 to 105.94 trading band. The Yen weakened on Wednesday on increased risk taking levels, and has remained soft as Wall Street maintained moderate gains through the morning. USD-JPY support comes in at 105.81, representing the 50-day moving average, with resistance now at the earlier 106.11 high.

    [GBP, USD]
    Cable climbed from 1.2902 lows into the open, later topping at 1.2949. Most major Dollar pairings were range bound through the session. BoE Governor Bailey said the central bank will use monetary policy "actively and aggressively" if needed, referencing the economic threat posed by Covid and associated restrictions, though the talk was similar to policymakers at other central banks, and so didn't have much impact on GBP. Attention remains fixated on the final phase of talks between the EU and UK, with just one week to go until the EU's summit. UK chief negotiator Frost said that the government is willing to compromise on the contentious issue of state aid rules to win an "eminently achievable" trade deal. It remains to be seen, and Sterling will remain tied to Brexit news.

    [USD, CHF]
    EUR-CHF remained under 1.0800 in N.Y on Thursday, trading a narrow range in the upper 1.07s. 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 printed near three-week lows of 1.3229 into the North American open, down from 1.3266 highs seen overnight. The run-up in crude prices has kept a cap on the pairing so far, as WTI crude headed over the $41 mark. The USD has been generally firmer so far this morning, though USD-CAD has remained near the bottom of its intra day range. USD-CAD later extended lower, touching a fresh near three-week base of 1.3200, down from 1.3250 at mid-morning. General USD weakness along with three-week highs in crude oil were the drivers of CAD strength. WTI crude was up more than 3% topping over $41.25/bbl. Meanwhile, Covid cases in Canada are on the rise, while hospitalizations and deaths have increased some recently as well. Partial lockdowns are in place, while Canada's heath authorities have urged people to stay at home as much as possible. While immediate impact on the CAD is not expected, the FX market will be on the lookout for further closures, which might impact the Canadian economy, and perhaps weaken the CAD.

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