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By XE Market Analysis October 26, 2020 2:56 pm
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    XE Market Analysis: Asia - Oct 26, 2020

    The Dollar was firmer in N.Y. on Monday, with safe-haven flows into the unit driven by extreme risk-off conditions. The DXT topped at 93.11 in late morning, up from 93.92 into the open. Wall Street was crushed on renewed Covid fears, as infections spike around the country, and by near-zero chances for a Fiscal stimulus package by next week's elections. The DJIA was down more than 3% intra day. Treasury yields were lower. Incoming data was mixed, with new home sales missing the mark, while the Dallas Fed index beat expectations. Neither had much impact on markets. EUR-USD moved from 1.1828 to 1.1806 in early trade, though has been as high as 1.1861 in Asia. USD-JPY rallied to 105.06 from 104.85, later slipping to 104.82. USD-CAD headed to 1.3225 from 1.3170 on weaker oil prices, while GBP-USD fell back from over 1.3070 into the open to 1.2995, later steadying near 1.3020.

    [EUR, USD]
    EUR-USD fell from London highs of 1.1848 to 1.1804 ahead of the N.Y. open, since moving between 1.1828 and 1.1806 through the session. The pairing had been as high as 1.1861 in early Asia. Concerns over a European double-dip recession due to the surges in Covid, which have brought new restrictions and lockdowns to bear have weighed on the Euro, while the accompanying risk-off backdrop has supported the USD to a degree on Monday. EUR-USD support comes at the 50-day moving average, currently at 1.1797, while Friday's 1.1865 high marks resistance.

    [USD, JPY]
    USD-JPY topped at 105.06 early, a four-session high, and up from Asian session lows of 104.65. The risk-off backdrop has seen the haven USD beat out the haven Yen this time around, as the Dollar has posted gains across the board. The pairing has since headed back to 104.86 lows into the London close, with profit taking cited as the drive of the modest pullback. USD-JPY resistance comes at 105.29, the 20-day moving average, with support at Friday's 104.55 low.

    [GBP, USD]
    Cable hit 1.3075 highs into the N.Y. open, later falling to 1.2995 at mid-morning before steadying near 1.3020. Risk-off related safe-haven USD buying weighed. There remains cautious optimism that the EU and UK are heading to a trade deal. EU trade envoy Barnier and his team have extended their time in London through to this Wednesday as intensive talks on the future relationship continue. Boris Johnson welcomed the fact that talks on legal texts are underway for the first time, while Brandon Lewis, a senior member of the UK cabinet, said that "there is a good chance we can get a deal." It is understood that Germany's Merkel and other EU heads of state are putting pressure on France to compromise on its demand for unchanged access to UK waters for fishing. While still downside risks, the Pound may have seen its worst levels for now.

    [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 rallied to a seven-session high of 1.3225, up from the Asian market opening low of 1.3124. Risk-off has supported the USD, while the slide in oil prices have weighed on the CAD. WTI crude was down better than 3.5%, under $38.40. The pairing edged above its 50-day moving average at .1.3199, with the October 16 high of 1.3238 the next upside target. Initial support is at the 20-day moving average of 1.3210.

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