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By XE Market Analysis October 22, 2019 2:11 pm
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    XE Market Analysis: Asia - Oct 22, 2019

    The Dollar was a bit lower in N.Y. on Tuesday, though generally rangebound overall. Softer existing home sales has little impact, while Treasury yields were slightly lower, and Wall Street mixed. The USD has traded significantly lower since the start of the month, in large part due to Brexit driven gains seen in the Pound and Euro, but also soft-ish U.S. data, and a likely 25 basis point rate cut. The FX market will begin to jockey for position ahead of next week's FOMC meeting, where future guidance will be key for the Greenback. EUR-USD traded a narrow range, topping at 1.1140, while USD-JPY was stuck between 108.45 and 108.63. USD-CAD eased to 1.3080 following an upbeat BoC outlook survey. Cable ran up to 1.2960 after Johnson said he might accept a short-term Brexit delay.

    [EUR, USD]
    EUR-USD was sideways through most of the N.Y. session, managing just a 1.1123 to 1.1140 trading band. Given the gains the pairing has seen since the start of October (1.0880 to Monday's three-month top of 1.1180), a breather, along with some profit taking appears to be in order, at least in the near term. The market though, is looking ahead to the FOMC meeting next week, where a 25 basis point rate cut is widely expected, which will likely bring Euro dip-buyers into play later in the week, or early next week. Brexit is another factor, where there is still potential for Pound and Euro volatility, depending how the divorce shakes out. Indeed, late in the session, the U.K. Brexit vote on the government's timetable failed to pass, sending EUR-USD from near 1.1150 to near 1.1120.

    [USD, JPY]
    USD-JPY has been range-bound for a week now, stuck between 108.30 and just under 109.00. Prospects for easing measures by both the Fed and BoJ next week have largely canceled each other out, with price action currently being driven largely by risk-taking levels. In order for a clearer directional picture to develop, USD-JPY needs to move above its 200-day moving average at 109.06, or under its 20-day moving average at 107.94. The pairing plied a 108.45 to 108.63 range through the N.Y. session.

    [GBP, USD]
    Sterling was lower in early N.Y. ahead of key parliamentary votes in the UK's Parliament. PM Johnson upped the ante by threatening to pull his Brexit deal if Parliament vote down a program motion to get the deal ratified in three days, and if the EU offers a three-month delay in Brexit. This would set up the prospect for a general election before year-end. Into the close, Cable topped at 1.3000, up from 1.2930 ahead of the U.K. parliament vote on the Withdrawal Agreement. The bill passed by a 329 to 299 margin. Next up was the vote on Brexit legislation timetable. This has not passed, which will open the door for Johnson scrapping the bill and calling an election. Cable quickly fell over 100 points to 1.2880.

    [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 printed a new three-month low of 1.3071 during the Asian session overnight, later rallying to 1.3122 following soft Canada retail sales. Canada's federal election resulted in a minority Liberal Party victory, which appeared to weigh on the CAD to a degree. With the Liberals now needing the left-leaning NDP to legislate, concerns over the passage of energy projects have been raised, including the key Trans Mountain pipeline, needed to get oil to export markets on the west coast. Later, the BoC's Outlook Survey further solidified the case for no rate change next week from the Bank. The survey revealed that business sentiment improved slightly in Q3 from Q2. Investment and hiring plans are "healthy" outside of energy producing regions. USD-CAD subsequently fell back to 1.3080 lows.

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