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By XE Market Analysis October 30, 2020 3:02 pm
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    XE Market Analysis: Asia - Oct 30, 2020

    The Dollar firmed up on Friday ahead of week- and month-end. Risk-off conditions supported safe-haven flows into the USD. Incoming data was better then expected, with income, consumption, Chicago PMI and Michigan sentiment all beating forecasts. Wall Street took another dive, as big-tech led the move lower on mixed earnings. Covid, election and stimulus concerns remained the driving forces. Treasury yields were higher on the day. EUR-USD fell from just over 1.1700 to 1.1640 lows, while USD-JPY rallied from 104.38 to 104.74. USD-CAD turned to 1.3349 highs from 1.3280. GBP-USD meanwhile, fell from 1.2988 to 1.2932.

    [EUR, USD]
    EUR-USD printed fresh one-month lows of 1.1640 in light afternoon trade, down from early highs of 1.1703. Fallout from Thursday's ECB meeting has continued to weigh on the Euro, with remarks from Lagarde the driver. She said the ECB could enact further stimulus measures out of schedule if conditions warranted. This brought 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. On the Covid front, the surge in European cases, and subsequent lockdowns will also no benefit the Euro, as fears of a double-dip recession increases.

    [USD, JPY]
    USD-JPY rallied to 104.74 in late morning trade, up from 104.38 early in the session. The pairing subsequently pulled back under 104.50 before steadying. The Dollar overall has been firm through the session, with safe-haven buying noted into the weekend and month-end, and ahead of Tuesday's U.S. election. Japan account Yen repatriation ahead of month-end and the election was hear earlier in the week, which kept pressure on USD-JPY. That appears to have run its course for now.

    [GBP, USD]
    Cable fell from opening highs of 1.2988, later bottoming at 1.2924 at mid-session. It's generally thought that the UK government is considering implementing another national Covid lockdown, while the BoE is widely expected to expand its QE program at its November policy review next week. This will be the third time since the Covid crisis started that the BoE has hit the monetary stimulus levers. The BoE has also stated that it is considering going negative with the repo rate, which is currently at 0.1%. On the Brexit front, there is still no breakthrough on the key sticking points. The final deadline is understood to be mid November. Big picture, the Pound appears to remain on shaky ground.

    [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 had a brief downturn from better than expected Canada August GDP early in the session, sending the pairing from 1.3310 to intra day lows of 1.3280. From there, a generally firmer Greenback, along with oil prices back down on the $35 handle, saw USD-CAD rally to 1.3349 highs in late morning trade. Thursday's one month top of .13390 now marks resistance, with support at the 50-day moving average at 1.3207.

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