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By XE Market Analysis October 18, 2019 2:06 pm
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    XE Market Analysis: Asia - Oct 18, 2019

    The Dollar fell further in N.Y. on Friday, with the DXY printing four consecutive lower daily lows through the week. The DXY touched a nearly two-month low of 97.35, down from Tuesday's high of 98.64. Softening U.S. data, and a likely 25 basis point Fed rate cut at the end of the month have weighed on the USD, while Brexit hopes supported the EUR and GBP this week as well. EUR-USD peaked near 1.160, a near two-month high, from session lows of 1.1135, while USD-JPY dipped to 108.39, pressured by risk-off conditions. USD-CAD remained under pressure, touching 1.3131, two-plus month lows. Cable peaked over 1.2910, after choppy trade in the high 1.2800s through most of the session. EUR-USD and GBP-USD are expected to be volatile when the new week kicks of in Asia on Sunday, when the Brexit result will be known in one form or another.

    [EUR, USD]
    EUR-USD printed near two-month highs of 1.1152 in early trade, later easing back to lows of 1.1135. Position squaring was likely behind the modest pullback, with European player selling out of long positions into this weekend's Brexit vote in London on Saturday. Since then, the pairing rallied toward 1.1160, appearing to react to a speech from Fed VC Clarida, who said the FOMC "will act as appropriate to sustain growth, a strong labor market, and a return of inflation to our symmetric 2 percent objective.” Given recently weakening U.S. data, the FX market took the words a a green light for an October rate cut. The Dollar dipped against the other major currencies as well.

    [USD, JPY]
    USD-JPY printed four-session lows of 108.39 in early afternoon N.Y. trade on Friday, down from 108.72 highs in late Asia. A soggy risk backdrop, driven by Brexit uncertainty, weaker China growth data, remaining uncertainty over U.S./China trade talks, along with a likely Fed rate cut at the end of the month, should all combine to limit USD-JPY gains into the weekend, and next week. The 109.00 to 109.06 area marks key resistance going forward.

    [GBP, USD]
    Sterling remained buoyant as markets braced for the too-close-to-call parliamentary vote on the Brexit deal on Saturday. The Irish PM had been trying to up the ante by saying that there was no guarantee that the EU would agree to a further delay in the event the deal has been voted down. A no-deal Brexit, which would be conceivable in the scenario where the EU -- even just one of the 27 states -- decides against agreeing to a delay. Another possibility is that the opposition manages to vote in a bill that would require the deal being subject to a legally binding confirmatory referendum, would decisively bring the Brexit saga to an end. Cable chopped between 1.2860 and 1.2910 through most of the later rallying over 1.2950 as Johnson made an appeal in an interview, saying there is no better outcome than his Brexit deal. He promised a "deep and special partnership", and a free trade agreement with the EU. Johnson said he is hopeful the agreement would pass the parliament vote on Saturday. The vote on Saturday could go either way, though Johnson will sell the deal to lawmakers until then.

    [USD, CHF]
    EUR-CHF pulled back from the two-plus month high of 1.1059 seen after the Brexit agreement, later basing at 1.0975. The agreement will need to be agreed to by the U.K. parliament, which may be a tough one for PM Johnson to pull off. As a result, the deal remains at risk, and the safe-haven CHF reacted by heading higher.

    [USD, CAD]
    USD-CAD was steady at lower levels overnight, matching Thursday's 2.5 month low of 1.3131, before peaking at 1.3145 in early North American trade. Recently better Canadian data, coupled with softening U.S. numbers, prospects for a Fed rate cut later this month, along with relatively firm oil prices have supported the CAD for the past two-weeks or so. Next support is at 1.3105, which was the July 31 low.

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