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By XE Market Analysis October 16, 2020 2:13 pm
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    XE Market Analysis: Asia - Oct 16, 2020

    The Dollar was under modest pressure early in the N.Y. session on Friday, which saw the DXY slip from London highs of 93.88, to a low of 93.54 after the open. Risk-on was in vogue again, which weighed on the USD, though sharply higher U.S. retail sales saw a modest reversal higher from there. Other incoming data revealed a weaker industrial print, though a slightly better consumer sentiment print. The retail sales figures, along with positive Covid vaccine news lifted Wall Street. Treasury yields were narrowly mixed. EUR-USD bottomed near 1.1710 early, later climbing modestly to 1.1744. USD-JPY again put in a narrow range between 105.22 and 105.44. USD-CAD fell from 1.3218 to 1.3177, while GBP-USD rallied from 1.2863 to 1.2945, later settling near 1.2920.

    [EUR, USD]
    EUR-USD rallied in early N.Y. trade, moving from under 1.1710 into the open, later topping at 1.1746 in relatively quiet end-of-week trade. Wall Street headed higher, which translated into lowered demand for the safe-haven Dollar. Later in the session, the pairing eased back to 1.1715 on London profit taking. On the Covid front, while cases are rising in the U.S., they are rising at an alarming rate across Europe, which could put an end to Europe's nascent economic recovery. As a result, the Euro may remain under some pressure in the coming weeks.

    [USD, JPY]
    USD-JPY opened the session at 105.22 lows, later rallying modestly to 105.44 highs. Today marked another day of narrow price action, indeed for the week, the pairing's range has been limited to 105.04 and 105.81. The Dollar and Yen continue to duke it out for the safe-haven title, with both rising against other currency peers in times of risk-off, and falling during periods of risk-on. As a result, USD-JPY has struggled to make much headway in either direction.

    [GBP, USD]
    The pound dropped quite sharply Thursday from levels above 1.3000 against the dollar, and edged out a two-day low at 1.2863 into the N.Y. open on Friday. Brexit drama remained at high levels with Johnson saying the UK must prepare for no deal unless there is a fundamental change of approach by the EU. The president of the European Commission von der Leyen subsequently stated that "our negotiation team will go to London next week to intensify these negotiations," which presumably comes with the knowledge of the UK government. Both sides essentially called each others bluff, but neither followed through on their threats. Meanwhile, the Pound hangs on tenterhooks, awaiting the final outcome.

    [USD, CHF]
    The Swiss franc eased a bit on Friday, as risk-on conditions returned, and as EUR-USD printed modest gains. The cross touched 1.0730 highs after hitting a three-month lows under 1.0700 on Thursday, as the Euro generally softened and as CHF buying picked up on the back of a risk-off session. The SNB explicitly targets the exchange rate as one of the means to achieve its policy goals. At its quarterly monetary policy review last month, the central bank stated that the franc remains "highly valued" and said it is ready to "intervene more strongly in the foreign exchange market".

    [USD, CAD]
    USD-CAD headed to session lows of 1.3177, down from earlier highs of 1.3218, and overnight highs of 1.3238. The usual suspects are behind the modest CAD strength seen this morning, including some general USD softening, oil prices up near the $41 mark, and a risk-on backdrop. In addition, pre-weekend position squaring is likely in the mix, after USD-CAD rallied from just under 1.3100 to 1.3260 through the week.

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