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By XE Market Analysis October 19, 2020 2:16 pm
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    XE Market Analysis: Asia - Oct 19, 2020

    The Dollar softened during the London morning session on Monday, though was generally steady through the N.Y. session, albeit at lower levels. The DXY fell from European highs of 93.76, later basing at 93.22 into the open. The risk-on conditions seen overnight weighed on the safe-haven USD, with only modest upticks seen after Wall Street gave back early gains. Uncertainty over whether or not both sides in D.C. can agree to a fresh stimulus package was behind stock losses. Treasury yields rose, despite equity losses. There was no incoming data to move markets. EUR-USD opened near 1.1790, and subsequently ranged between 1.1773 and 1.1794. USD-JPY started at 105. 30 before peaking at 105.49, later easing under 105.40. USD-CAD drifted from 1.3180 to 1.3150, while GBP-USD, meandered between 1.2968 and 1.3025.

    [EUR, USD]
    EUR-USD gains were capped ahead of the 50-day moving average at 1.1795, peaking at 1.1794 earlier, and since heading back under 1.1780. Risk on conditions overnight allowed the Dollar to pull back, though with Wall Street erasing gains and turning negative on the back of uncertainty over a fresh U.S. fiscal stimulus package, the save-haven Greenback may have some room to move higher again. Uncertainty over Brexit, which will certainly have some impact on the Continent, along with huge spikes in Covid cases in all the larger European countries, will ultimately have impact on the Euro, likely in a negative way.

    [USD, JPY]
    USD-JPY remained mired inside of a narrow trading band, as it has for a week now, as the two safe-haven currencies continue to run into each other. Since last Monday, the pairing has been held to a less than an 80 point trading range. The N.Y. session range was a measly 105.30 to 105.49 on Monday. Better China production and retail sales data, a harbinger for better economic times in Asia as a whole, allowed the Yen to pull back modestly. USD-JPY resistance comes at the 20-day moving average of 105.51, with support at Friday's low at 105.19.

    [GBP, USD]
    Cable rallied through the London morning session, moving from 1.2923 lows to a N.Y. high of 1.3025. The pairing later retreated back to the upper 1.2900s before steadying. Talks between the EU and UK are continuing, despite Boris Johnson's political grandstanding on Friday when he said that discussions were over, although having been downgraded by the Downing Street to video conferences. The consensus expectation remains for a limited deal to be produced by mid November and ratified on both sides of the Channel in time for the conclusion of the transition period at year end. A BBC journalist reported that the EU's Barnier is "frustrated" with leaders of coastal EU nations for not, yet, allowing him to proceed on tackling inevitable compromises on fishing rights. But pundits and market participants, as evidenced by the Pound's rise today, are confident a deal will be reached, being a simple choice between no fishing rights in UK waters under a no deal scenario versus lesser quotas under an agreement. We remain bearish on the pound over the medium term.

    [USD, CHF]
    The Swiss franc has been trading with firming bias, consistently rebounding from bouts of weakness in recent months and driving the EUR-CHF cross to levels under 1.0700 last week for the first time in three months. Markets are anticipating revamped monetary easing measures from the ECB while factoring in Brexit risk. The franc has a proclivity to ascend on the back of its balance of payments position. The SNB stated at its quarterly monetary policy review last month that the franc remains "highly valued" and said it is ready to "intervene more strongly in the foreign exchange market."

    [USD, CAD]
    USD-CAD hit 1.3151 lows in late morning North American trade, down from 1.3198 highs seen overnight. Firmer oil prices, along with general USD softness has put some pressure on the pairing, though with the risk backdrop looking a little shaky now, demand for the safe-haven Greenback could return. USD-CAD support comes at Thursday's 1.3143 low, with resistance at 1.3209, which represents the 50-day moving average. The BoC's Q3 Business Outlook Survey revealed improvement over the summer following the plunge in spring, with firms citing the reduction in COVID-19 restrictions and advent of warmer weather. However, sentiment remains quite weak across all regions, with firm expecting the pace of sales recover to be slow. The Business Outlook Survey indicator improved to -2.2 in Q3 from the record low -6.9 in Q2, consistent with improved but still weak sentiment.

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