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By XE Market Analysis September 3, 2019 1:55 pm
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    XE Market Analysis: Asia - Sep 03, 2019

    After rallying to two-plus year highs, the Dollar index pulled back in N.Y. on Tuesday. After peaking at 99.37, the DXY fell back to 98.93 lows in the aftermath of a weaker U.S. manufacturing ISM outcome. the IS headed to contraction territory under the 50.0 mark for the first time in over three-years. Trade concerns were renewed following the imposition of additional U.S. tariffs on Chinese goods, which saw Wall Street and Treasury yields tumble. EUR-USD recovered from trend lows of 1.0926, topping at 1.0971. USD-JPY meanwhile, slipped from 106.31 highs to 105.74 lows. USD-CAD printed two-plus month highs of 1.3382 on weaker oil prices, later falling under 1.3325. Cable recovered from its trend low of 1.1958, topping near 1.2010 after the London close.

    [EUR, USD]
    EUR-USD printed fresh 27-month lows of 1.0926 into the N.Y. open, later bouncing to 1.0971 following the weaker U.S. manufacturing ISM. The pairing has posted six straight sessions of lower daily highs and lows, a bearish development, though further short covering could be in the cards near term, as the market attempts to re balance itself. Bigger picture, weak EU fundamentals, an ECB set to ease, and Brexit remain in the picture, likely leading to further Euro losses down the road.

    [USD, JPY]
    USD-JPY fell to lows of 105.73 following the sub-50 manufacturing ISM, coming from session highs of 106.31 after the open. In addition to the weaker data, the risk-backdrop remained markedly soured following the imposition of additional U.S. tariffs on Chinese goods on Sunday. Last Wednesday's 105.65 low is the next support level.

    [GBP, USD]
    The Pound was very volatile both in London and N.Y. trade, with Cable hitting a major-trend low at 1.1958, then spiking to a 1.2103 rebound peak. The rally was seen as U.K. opposition parties and Conservative Party rebels put in their application for an emergency debate on Brexit. Cable's high came as the government lost its majority, with a Conservative member defecting to the Liberal Democrats, likely weakening PM Johnson's efforts to keep parliament from his attempt to bring on a no-deal Brexit. Brexit proceedings are still a little way from reaching a definitive point, which is increasingly looking likely to happen at a general election. This should for now maintain two-way directional risk with regard to the pound.

    [USD, CHF]
    EUR-CHF pulled back to two-plus year lows at 1.0820 from over 1.0920 in N.Y. on Friday, with the driver being EUR-USD's breakdown to 27-month lows of near 1.092, and another risk-off session. We retain a bearish view of the cross given ECB's course to additional monetary stimulus in September, and the risk of a disorderly no-deal Brexit on October 31.

    [USD, CAD]
    USD-CAD rallied to two-plus month highs of 1.3382 in early North American trade, up from early Asian lows of 1.3319.The combination of risk off conditions, along with sagging oil prices has supported the pairing. WTI crude fell nearly 4%, bottoming at $52.84, a near one-month lows following the U.S. imposition of additional tariffs on Chinese good. The next USD-CAD resistance level comes at 1.3400.

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