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By XE Market Analysis September 3, 2020 2:49 pm
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    XE Market Analysis: Asia - Sep 03, 2020

    The DXY headed up to 93.01 in late morning trade, after bottoming earlier at 92.77. The USD then faded in relatively light trade through much of the afternoon session. Weekly jobless claims were lower than expected, though the data were impacted by a change in the seasonal adjustment methodology, while the July trade deficit blew out to the highest levels since 2008. The data weighed on the Dollar, though focus was on Wall Street, as techs in particular sold of sharply on profit taking. Treasury yields were lower. EUR-USD headed from pre-opening lows of 1.1807 to a high of 1.1850 in afternoon trade. USD-JPY opened at 106.55 highs, later heading to 106.02. USD-CAD bucked the trend, rallying to 1.3161 highs from 1.3087 lows as oil prices fell. GBP-USD bottomed at 1.3244, later printing a 1.3287 peak.

    [EUR, USD]
    EUR-USD traded to 1.1802 lows into the N.Y. open, later recovering to 1.1850 highs before chopping around in a 1.1819 to 1.1840 range. The pairing had printed a one-week low of 1.1790 overnight, with the ECB's chief economists words that the EUR-USD rate matters still weighing some on the pairing. In addition, a dovish ECB announcement next week, where Lagarde is expected to strengthen the "low for longer" message following the negative inflation print. The next EUR-USD support level comes at the August 27 low of 1.1763.

    [USD, JPY]
    USD-JPY topped at 106.55 in early N.Y. trade, briefly moving above its 50-day moving average. From there, as the risk-backdrop turned decidedly negative, the risk-sensitive pairing sold off to 106.02 lows. A sharp slide on Wall Street, along with lower Treasury yields weighed. USD-JPY support is at Wednesday's 105.85 low, with resistance at the 50-day moving average at 106.45.

    [GBP, USD]
    Cable fell from early Asian highs of 1.3358, later hitting a six-day low of 1.3242 into the London close. Market participants have become increasingly sensitive to an accumulation of negatives and risks with regard to the UK economic outlook. BoE policy voter Vlieghe said yesterday that there is a "material risk" that it could take several years before the economy to return to full capacity following the lockdown shock. Final services and composite August PMI data out of the UK were revised lower, and Brexit uncertainty continues to linger. We expect GBP-USD to continue being sold on strength.

    [USD, CHF]
    EUR-CHF once again failed to sustain gains above the 1.0800 level, returning to familiar levels in the mid 1.0700s. This is a pattern that has been repeating for about six weeks now. This week the cross spiked sharply, on Tuesday, to a three-month peak at 1.1882. The rally was concomitant with EUR-USD soaring into 28-month high territory above 1.2000. Robust manufacturing data from most key global economies, and global stock market gains may have also helped weaken the low beta, safe haven Swiss franc. The influence of the SNB's intervening hand may have been at play during the recent upside bursts.

    [USD, CAD]
    USD-CAD printed a one-week high of 1.3121 in early North American trade. The move from 1.3038 lows seen after Wednesday's close came as oil prices hit a one-month bottom. WTI crude tumbled to $40.23, after topping at $43.21 on Wednesday. The recent up tick in the USD has supported the pairing as well, as the DXY has rallied as much as 1.4% since September 1.

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