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By XE Market Analysis October 29, 2020 2:30 pm
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    XE Market Analysis: Asia - Oct 29, 2020

    Despite the largely risk-on backdrop in N.Y. on Thursday, the Dollar rallied broadly. Solid incoming data appeared to have a bit of a delayed reaction from the FX market, as Q3 GDP beat consensus forecasts, as did the weekly jobless claims figures. The DXY rallied to one-month highs of 94.10, up from overnight lows of 93.34. Wall Street was choppy, though sentiment was buoyed to a degree by the better data. Covid concerns remain however, along with election jitters. The NASDAQ outperformed ahead of the slew of big-tech earnings reports due after the close, including from Apple, Amazon Alphabet and Facebook. EUR-USD topped at 1.1710 early, later making its way to one-month lows of 1.1655, as ECB's Lagarde hinted at further stimulus by December. USD-JPY ran up to104.71 highs, from pre-opening lows of 104.03. USD-CAD hit a one-month high of 1.3390, as oil prices sank due to the rise of Covid lockdowns. GBP-USD fell from 1.3026 highs before the open to 1.2882.

    [EUR, USD]
    EUR-USD edged back under 1.1700 early in the session, after bouncing slightly to 1.1717 in the aftermath of the U.S. GDP and claims data. A dovish slanting ECB policy statement likely brought in a few sellers, though activity from there was limited until Lagarde's press conference. EUR-USD then headed to a one-month low of 1.1655 after Lagarde said the ECB could act out of schedule if conditions warranted. This brings some added uncertainty into the market, which FX traders are not particularly fond of. The Euro is not running away to the downside, but we expect the unit will continue to be sold into on modest upticks for now, as markets look for further stimulus and as Covid lockdowns in Europe are on the rise.

    [USD, JPY]
    USD-JPY rallied from better than one-month lows of 104.03 into the open, since peaking at 104.71 into the London close. The improved risk backdrop seen following the early U.S. data weighed on the safe-haven Yen, though USD-JPY short covering has been reported following three straight sessions of lower daily lows. Tuesday's 104.89 high marks the next resistance level, though the risk-backdrop will continue to largely dictate USD-JPY direction at least through the U.S. election next week.

    [GBP, USD]
    Cable fell from 1.3026 highs into the N.Y. open, to near two-week lows of 1.2882 into the London close. The move lower came on general USD strength, which saw the DXY ramp up to one-month highs. Spiking Covid cases in the U.K. and Europe will have added to Sterling's downside. The Brexit endgame is also in the mix. Negotiations are continuing, and the teams are reportedly working to a mid-November deadline. Market participants are cautiously optimistic that at least a narrow free trade deal will be reached, but still await concrete news that the two sides have reached a breakthrough on the key sticking points.

    [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 traded to near one-month highs of 1.3390, up from overnight lows of 1.3279. Another 5-plus percent dive in WTI crude was the main driver of CAD weakness, though general USD strength weighed as well. Oil prices printed four-month lows, and approached the $35 mark, after trading near $40 early in the week. The pairing later reversed course lower after WTI crude prices recovered over $1.00/bbl to $36.28 highs. Initial USD-CAD resistance comes at the psych 1.3400 level, though a series of tops between 1.3404 and 1.3420 seen in late September will likely provide stronger resistance.

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