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By XE Market Analysis September 5, 2019 2:28 pm
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    XE Market Analysis: Asia - Sep 05, 2019

    The Dollar was under some pressure early in the session, amid risk-on conditions on the back of new trade negotiation plans between the U.S. and China in October. The Greenback later turned higher following a stronger ADP jobs report, and a sharper rebound in the services ISM. The DXY bottomed ahead of the ISM at 98.09, later rallying back to 98.41. EUR-USD peaked at 1.1085, coming up from 1.10 17 lows in London, later falling back into 1.1035. USD-JPY liked the risk on backdrop and higher Treasury yields, making three-week highs of 107.22. USD-CAD rallied from 1.3192 to 1.3245, while Cable topped at 1.2353, a one-month high, as a no-deal Brexit is looking less likely.

    [EUR, USD]
    EUR-USD rallied early in the session topping at 1.1085, right at its 20-day moving average. Gains came on risk-on conditions, along with the market's apparent scaling back of ECB easing expectations. Later, a stronger ADP jobs report and firmer services ISM reversed the pairing's course, as the Dollar turned broadly higher on the data. The Euro later eased back toward 1.1035 before steadying. Relative strength of the U.S. economy over Europe should keep EUR-USD in sell-the-rally mode going forward.

    [USD, JPY]
    USD-JPY rallied sharply early in the session, peaking at 107.22, levels last seen on August 2, and above its 50-day moving average for the first time since August 1. Prospects for U.S./China trade talks in October, along with better U.S. data, and the accompanying Wall Street and Treasury yield rallies, supported the pairing through the morning session. Modest selling stepped in into the London close, taking the Dollar back down toward 106.90.

    [GBP, USD]
    Cable rallied to over one-month highs in early N.Y., topping at 1.2353 before steadying. The move came as the odds for a no-deal Brexit ebbed back some in light of political developments in the UK. With legislation that would block a no-deal Brexit on October 31 looking likely to pass (already passing in the House of Commons last night), and PM Johnson's position now untenable, an election on October 15 is looking inevitable. The risk of a no-deal Brexit could still return should Johnson's Tory party win the election, and would be very likely if he was forced to make a coalition with the Brexit Party. But even then it would not be unreasonable to anticipate that the pain of a no-deal reality would see the UK to quickly seek concessions from Brussels, which in such an eventuality would return support to the Pound.

    [USD, CHF]
    EUR-CHF printed a fresh 26-month low at 1.0813 on Wednesday, extending what has been a five-month bear trend, reflecting in part demand for the Swiss Franc's as a safe haven and in part as markets factor in looser ECB monetary policy. Risk appetite picked up some on Thursday, allowing the cross to recover over 1.0910. Markets are beginning to rein-in aggressive ECB easing moves later this month, allowing the Euro to recover some ground, while the risk of a disorderly no-deal Brexit on October 31 has been pared down. Overall though we retain a bearish view of EUR-CHF.

    [USD, CAD]
    USD-CAD printed better than three-week lows of 1.3192 into the North American open, adding to the sharp losses seen after the BoC announcement on Wednesday. Another risk-on session weighed on the USD early, while WTI crude near one-month highs supported the CAD. From there, a test of the 1.3188 50-day moving average failed, with USD-CAD short covering stepping in the back of strong U.S. data. The pairing later rallied back over 1.3245.

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