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By XE Market Analysis October 23, 2019 3:13 pm
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    XE Market Analysis: Asia - Oct 23, 2019

    The Dollar was largely sideways through the N.Y. session on Wednesday, confining the DXY to a narrow 97.52 to 97.61 trading range. There was little in the way of data to provide direction, while stocks and yields were nearly flat on the day as well. EUR-USD traded sideways between 1.1112 and 1.1125, and will likely remain unmoved into Thursday's ECB meeting, where no policy changes are expected. USD-JPY headed from 108.45 at the open to 108.70 in afternoon trade. USD-CAD was steady early on, later falling to 1.3075 on firmer oil prices. Cable managed a 1.2896 to 1.2863 trading band.

    [EUR, USD]
    EUR-USD printed five-session lows of 1.1106 into the N.Y. open, down from Asian highs of 1.1131. The pairing has continued to pull back from the two-plus month highs of 1.1180 seen on Monday, levels generally seen as over-extended. Into Thursday's ECB meeting, further consolidation can be expected, barring an unforeseen Brexit event. No policy changes are expected from the ECB, though as usual, the market will listen closely for future policy hints. The 1.1100 level marks initial support, with the 50-day moving average at 1.1034 the next downside target after that.

    [USD, JPY]
    USD-JPY recovered from seven-session lows of 108.25 seen during Asian hours, peaking at 108.70 after the London close. The pairing lost ground overnight as Asian equity markets were mostly in the red, and general risk taking levels faded. Modest Wall Street gains prompted some short covering at the N.Y. open, though solid resistance just over the 109.00 level, along with reports of Japanese export offers in the same vicinity, should combine to limit gains going forward.

    [GBP, USD]
    Cable recovered back above 1.2895 in N.Y. after earlier posting a five-day low at 1.2841, which extended the decline from the five-month peak seen on Tuesday at 1.3012. The prompt was news of UK Parliament's rejection of PM Johnson's program bill to fast track the ratification of the EU withdrawal legislation, which would have been needed for Brexit to happen by the end of the month. This potentially opened the door to a no-deal Brexit should the EU decide to refuse an extension of the Brexit deadline from October 31, but markets are savvy to the view that this is highly unlikely as Brussels will not want to get the blame for a no-deal Brexit scenario. The EU has indicated that it is preparing some kind of flexible extension to the October 31 deadline, which would allow Brexit to happen as-and-when the UK Parliament ratified the Brexit deal with a final deadline of January 31. The opposition are in a powerful position to make amendments to the bill, including making the deal subject to a confirmatory referendum.

    [USD, CHF]
    EUR-CHF recovered from overnight losses, topping at 1.1025. The worst case for Brexit appears to be behind us now, though it appears a delay is the best case scenario for now. Odds for a crash-out no- deal have fallen sharply sine the start of the week, adding some weight to the risk-sensitive CHF.

    [USD, CAD]
    USD-CAD was range bound overnight, moving between 1.3109 and 1.3088 at the North American open, and above the three-month low of 1.3071 seen on Tuesday. There was very little market reaction to Trudeau's re-election, despite the potential that the new minority government may lack the power to push through energy infrastructure programs, including a key oil pipeline to the west coast. Some have downplayed this aspect, largely because the Liberals maintained more seats than expected, reducing the chances that one of the smaller parties can bring down the government. USD-CAD later headed to 1.3075 lows as WTI crude prices rallied sharply.

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