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By XE Market Analysis October 21, 2019 3:10 pm
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    XE Market Analysis: Asia - Oct 21, 2019

    The Dollar advanced slightly overall in N.Y. trade on Monday, after sliding lower overnight, and through much of the last week. Gains in Sterling and the Euro have been the major weight on the USD of late, as Brexit appears about ready to be sewn up in the not too distant future. Dollar weakness meanwhile, has been driven by relatively soggy incoming U.S. data. EUR-USD pulled back from two-month highs of 1.1179, basing at 1.1139 at mid-session. USD-JPY found some support from improved risk taking levels, topping over 108.60, while USD-CAD fell to three-month lows of 1.3085, while Cable topped at fresh five-month highs of 1.3012.

    [EUR, USD]
    EUR-USD slipped slightly from the two-month plus highs of 1.1179 seen overnight, basing at 1.1139 into the London close. The pairing printed higher daily highs every day last week, and is within sight of the solid resistance 200-day moving average, at 1.1207. Recent sharp Euro gains have come on a combination of general Dollar weakness, fueled by damp U.S. data, and hopes for a successful conclusion of the Brexit saga. A wrap-up of Brexit will likely prompt a round of "sell-the-news" EUR-USD profit taking.

    [USD, JPY]
    USD-JPY has steadied over 108.50 in N.Y. trade, coming from one-week lows of 108.29 seen in early Asian dealings. The pairing has found some support from the improved risk backdrop, though prospects for a Fed rate cut in two-weeks, and ongoing trade uncertainty can be expected to keep upside contained. Solid resistance lies at 109.00 to 109.06, the latter which represents the 200-day moving average.

    [GBP, USD]
    Sterling outperformed, rallying to fresh five-month highs against the Dollar, at 1.3012. This makes the third consecutive week where the previous week's peak has been breached. This is also potentially the eighth week the pair has rallied out of the last 11 weeks. Markets are diminishing the risk of a disorderly no-deal Brexit while pricing-in stronger odds for the Brexit deal on the table to be passed or, if not, for there to be a delay and referendum and/or general election. The UK Parliament's voting in favour of an amendment that forced PM Johnson to ask for the EU for a delay, and that ensures that legislation for PM Johnson's deal has passed before the actually vote on the deal itself, has effectively wiped out the risk for there being a no-deal Brexit on October 31. Note that Brexit can still happen on October 31, provided that the legislation for it passes and the actual vote on the deal passes on time.

    [USD, CHF]
    EUR-CHF has been lifted by the Brexit deal, which has been supportive of the euro. The cross printed a two-and-a-half-month high at 1.1059 last week before pulling back under 1.1000.

    [USD, CAD]
    USD-CAD fell to three-month lows of 1.3085 in North American trade. The pairing has been under pressure for the better part of two-weeks, largely on the back of USD losses, the result of the unwinding of safe-haven Dollar flows, as trade tensions subside some. In addition, the CAD has benefited from prospects for a Fed rate cut at the end of the month, which would essentially eliminate the USD premium over Canadian rates. Canadian elections are being held today, with the result likely ending up being a minority government, which may see recent CAD gains come undone to a degree. On the data front, Canada August retail sales are due on Tuesday.

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