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By XE Market Analysis September 2, 2020 2:47 pm
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    XE Market Analysis: Asia - Sep 02, 2020

    The Dollar posted modest gains in N.Y. on Wednesday, adding to the overnight advance. The driver of the USD move higher was comments from ECB chief economist Lane, who added a small dose of "verbal intervention, saying that the rise of the EUR is not a target for the central bank per se, EUR-USD is of course an important factor for the ECB's assessment of the inflation outlook. This saw EUR-USD moved further from Tuesday's 1.2011 high, and bottoming in N.Y. at 1.1822. The comments helped the Dollar across the board. The ADP employment survey missed the mark by a wide margin, though had only brief impact on the USD. Wall Street was higher despite the soft data. Treasury yields headed a bit lower. USD-JPY headed from 106.08 into the open to 106.30. USD-CAD bottomed at 1.3055, later printing a peak of 1.3095. Cable topped at 1.3364 at the open, subsequently falling to 1.3284 lows before steadying near 1.3320.

    [EUR, USD]
    EUR-USD hit session lows of 1.1822, after getting a bit of a boost to 1.1876 following the disappointing ADP jobs report. Pressure on the Euro remains after ECB chief economist Lane said last night that while the ECB doesn't target the exchange rate, the EUR-USD rate matters, while highlighting that we have seen a repricing in the Euro in recent weeks. This round of "verbal intervention" took EUR-USD further from the 28-month high of 1.2011 seen on Tuesday, and may continue to dissuade Euro bulls for the time being. The 20-day moving average at 1.1837 may become a pivot point for the pairing through the morning session.

    [USD, JPY]
    USD-JPY was range bound through the N.Y session, though managed a three-session high of 106.30 in early trade. The Dollar recovered broadly on Tuesday, led by EUR-USD losses which came following a light round of "verbal intervention" by the ECB's chief economist, saying the EUR-USD rate matters. USD-JPY remains sensitive to the risk backdrop, and another day of Wall Street gains provided some support. A USD-JPY close over the 20-day moving average at 106.09 could see some follow through buying overnight.

    [GBP, USD]
    Cable hit a low at 1.3284 in late morning trade, down quite sharply from the eight-plus month high that was printed Tuesday at 1.3484. This left December's 1.3516 peak unchallenged. A rise above this level would put the pair in 28-month terrain. The pound faces downside risks, including possible tax hikes and the risk of a bare-bones trade deal or no-deal outcome of the Brexit endgame. For now, the UK currency looks set for more mixed trading.

    [USD, CHF]
    EUR-CHF fell to 1.0776 lows on Wednesday, after hitting near three-month highs of 1.0877 on Tuesday. The move lower came as EUR-USD fell back toward 1.1800 from the 28-month highs over 1.2000 seen Tuesday. The influence of the SNB's intervening hand may have been at play this week, too. Total Swiss sight deposits of francs have risen by 130 bln since the pandemic and consequential lockdowns took a grip on global markets back in March. Sight deposits can be viewed as a proxy marker of SNB intervention to sell francs in forex markets (after buying foreign currencies), which results in the crediting of newly created francs at commercial banks sight accounts.

    [USD, CAD]
    USD-CAD took a break from its string of five-straight lower daily highs and lows, bouncing from the seven-plus month lows of 1.2994 seen on Tuesday. The pairing bottomed at 1.3053 in Asia and has recovered to 1.3095 highs in early North America. A general USD bounce supported, while crude price softness this morning has put a floor under the pairing as well. WTI crude fell under $41.50, despite a large EIA reported inventory draw, down from near $43.00 at the open.

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