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By XE Market Analysis October 20, 2020 2:18 pm
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    XE Market Analysis: Asia - Oct 20, 2020

    The Dollar was lower on Tuesday, with risk-on conditions weighing. The DXY fell to a one-month low of 93.00, down from 93.29 at the open. Wall Street rallied, as renewed hopes for a fiscal stimulus package brought in buyers. Pelosi and Mnuchin are set to hold another round of talks on Tuesday, after it was reported that differences are being narrowed. It remains to be seen if a package is agreed to before the election just two-weeks away. Treasury yields were slightly firmer. For data, September U.S. housing starts missed consensus, but had little impact on markets. EUR-USD printed one-month highs of 1.1851 after opening near 1.1800. USD-JPY peaked at 105.75 early, later easing back toward 105.50. USD-CAD fell from 1.3197 to 1.3111, while GBP-USD chopped between 1.2911 and 1.2975, settling near mid-range into the close.

    [EUR, USD]
    EUR-USD chugged its way up to one-month highs of 1.1841, as risk-on again pressures the Dollar. In addition, the EU's first offering of social bonds designed to finance a jobs program, received orders of more than EUR 233 bln, which has underpinned the Euro as well. The surge in Covid cases in major European countries will likely prove to be a counterbalance for EUR-USD as new lockdowns and restrictions are implemented, with potential to snuff out the nascent EU economic recovery. According to NYT data, new cases in Germany are up 176% over the past two-weeks, with deaths up 169%. In France, the metrics show a 104% rise in cases and a 60% increase in deaths. EUR-USD support is at the 50-day moving average of 1.1795, with resistance at the September 21 top of 1.1872.

    [USD, JPY]
    USD-JPY printed seven-session highs of 105.74, up from overnight lows of 105.49, and opening lows of 105.60. Sellers later emerged into the 50-day moving average at 104.75, which saw the pairing ease back toward 105.50. The dueling safe-haven currencies continue to keep trading ranges hemmed in, with USD-JPY managing just a 105.81 to 105.04 band since October 12. More of the same can be expected for the time being.

    [GBP, USD]
    Cable was choppy in N.Y. trade on Tuesday, touching 1.2979 highs into the open, later falling to 1.2911 before hitting 1.2975 highs. The Brexit endgame remains in sharp focus. Talks are continuing between the EU and UK, though there has been no sign of a breakthrough, while Boris Johnson and senior minister Michael Gove have launched a high-profile campaign to encourage UK businesses to prepare for major changes, including a no deal scenario. The consensus expectation, as reflected by the stability of the pound, 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. We remain bearish on the pound over the medium term.

    [USD, CHF]
    The Swiss franc has been trading with a 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 session highs of 1.3197 just after the North American open, reacting to the modest downturn in WTI crude prices. Since then, the slight pullback in the USD generally, given current risk-on conditions and a subsequent rebound in crude saw the pairing ease to 1.3111 lows into the close. The 50-day moving average at 1.3207 marks resistance now, with support seen at Monday's low at 1.3151. Focus will shift to Wednesday, where Canada releases September CPI and August retail sales. We see overall CPI to fall 0.3%, and total retail sales up 1.1%.

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