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By XE Market Analysis October 10, 2019 2:54 pm
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    XE Market Analysis: Asia - Oct 10, 2019

    After fading overnight, the Dollar slipped further in N.Y.. trade on Thursday. Cooler U.S. CPI didn't help the Greenback, while hopes for a U.S./China trade deal in one form or another pressured the USD, as recent safe-haven flows were reversed. Wall Street and yields moved higher after it was announced that Trump would meet China vice-premier Liu He at the White House on Friday. The DXY printed better than two-week lows of 98.63, from overnight highs of 99.06. EUR-USD meanwhile, touched three-week highs of 1.1035 into the open, later fading slightly to 1.1002 lows. USD-JPY topped at 107.97, taking its cur from trade talk and risk-on conditions. USD-CAD bottomed at 1.3269, later recovering to near 1.3300, while Cable shot up to two-week highs following encouraging Brexit remarks from Ireland's PM. Looking ahead, Friday's trade talks will be make-or-break for markets, with a breakdown in talks likely to support the USD.

    [EUR, USD]
    EUR-USD headed to three-week highs of 1.1035 in London morning trade, later settling lower, basing at 1.1002. The Euro's gains came despite soggy German export data, indicative of a looming recession there. The driver appears to have been further unwinding of safe-haven buying in light of more positive sentiment on the U.S./China trade negotiations. In addition, Dollar bulls have lost some aggressiveness of late, as a Fed rate cut looms at the end of the month. EUR-USD is set to close above its 20-day moving average of 1.0985 for the first time since September 17, and now has its sights on the 50-day moving average at 1.1050.

    [USD, JPY]
    USD-JPY has rallied to seven-session highs over 107.97, up from lows of 107.38 seen immediately following the cooler U.S. CPI report. A higher Wall Street (versus negative futures early) along with an uptick in Treasury yields have supported so far this morning. Today's high-level U.S./China trade talks in Washington provide the wild card, with potential to impact the pairing either positively or negatively, depending on the headlines generated. The odds of a trade breakthrough remain slim, though with Trump to meet with China vice-premier Liu He at the White House on Friday, the market held on to some hope.

    [GBP, USD]
    Cable rallied to better than two-week highs of 1.2424 after the London close, and up from N.Y. lows of 1.2216. A meeting between U.K. PM and Irish PM Varadkar was behind the rally. Varadkar said he "sees pathway to a possible deal" on the Irish backstop issue, and "all sides would like an agreement next week". He added that he "hopes that today's talks are sufficient for talks to resume". Perhaps some light at the end of the Brexit tunnel?

    [USD, CHF]
    EUR-CHF recovered to one-week highs of 1.0977 from Tuesday's post-close low of 1.0870. An improvement in risk appetite again helped lift the cross today, as China indicated it might agree to a partial trade deal. and as China vice-premier Liu He will meet with Trump on Friday. In the U.K., Brexit concerns eased, with Irish PM telling PM Johnson "sees pathway to a possible deal" on the Irish backstop issue.

    [USD, CAD]
    USD-CAD faded to seven-session lows of 1.3269, with selling picking up after breaking under its 200-day moving average at 1.3287, which had held through the week. Firming oil prices have provided weight to the pairing as well. The next support level comes at the 50-day moving average, currently at 1.3265. The pairing can be expected to consolidate near current levels, as traders look ahead to Canada's September employment report on Friday morning.

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