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By XE Market Analysis September 17, 2019 1:45 pm
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    XE Market Analysis: Asia - Sep 17, 2019

    Overall, the Dollar reversed course lower in N.Y. trade on Tuesday, with the DXY unwinding the gains seen to start the week. The Dollar index pulled back to 98.23, coming from four-session highs of 98.74 seen overnight. Position squaring ahead of Wednesday's FOMC announcement, where a 25 basis point rate hike is widely expected, was the driver of the Greenback's modest move lower. Incoming U.S. data, including industrial production and the NAHB housing market index, beat forecasts, though had little market impact. EUR-USD made its way from 1.1015 early, to over 1.1070 after the London close. USD-JPY topped at 108.35 from under 108.10, later dipping to 108.05. USD-CAD printed 1.3300 on lower oil prices, later pulling back toward 1.3235 as oil recovered some of early losses. Cable meanwhile, rallied to 1.2504 from from pre-open lows under 1.2400.

    [EUR, USD]
    EUR-USD reversed Monday's losses, trading to 1.1066 highs, and up from 1.1015 lows at the open. The market will now largely be sidelined into Wednesday's FOMC announcement, where the degree of dovishness from Powell et al will be the driver. Even if the Fed comes in more dovish than currently priced in, we look for traders to fade the likely rally into the 50-day moving average of 1.1112. Given the relative U.S. growth and interest rate differential in favor of the USD, and the ECB's dovish outlook, we continue to prefer EUR-USD downside.

    [USD, JPY]
    USD-JPY has been rangebound through the N.Y. session, bottoming at 108.09 early on, then rallying to 108.35 highs as Wall Street pared gains, and oil prices fell following reports that Saudi would restore oil production sooner than expected on Monday. The pairing has since settled back under 108.20 in light trade. Barring fresh risk-events, consolidation can be expected into Wednesday's FOMC announcement, centered on the 108.00 mark, where the tone of the Fed's outlook will be key.

    [GBP, USD]
    The Pound put in an upward spurt which more than reversed intraday losses. Cable rallied nearly a big figure out of the low seen during the London morning session, at 1.2392. Buying of Cable as part of a broader selling-dollar move on news of the NY Fed's first-in-a-decade overnight repo seemed to catalyse specific demand for the pound, generated by the consequential triggering of stop-loss (or other) buy orders in Cable. This comes after a one-month phase of sterling outperformance, which reflected a broader correction from major-trend lows as markets took a more circumspect view of no-deal Brexit risk.

    [USD, CHF]
    EUR-CHF bounced to six-week highs over 1.0992 after falling to 1.0912 following the Saudi oil attack, where the CHF again showed its safe-haven credentials. With the U.S. appearing to wait and see with regard to Iran's actions, and the Saudis indicating oil production could resume sooner than initially expected, the cross was able to recover some.

    [USD, CAD]
    USD-CAD bottomed at 1.3235 after Monday's close, rallying to 1.3278 highs early in the session. Softer Canada manufacturing data earlier, along with the relative stabilization of WTI crude prices following Monday's huge gains allowed the pairing to move higher. Later, USD-CAD popped to two-week highs of 1.3300 from 1.3270 following reports that Saudi Arabia's oil production would be fully restored in 2-3 weeks, which resulted in a nearly $3/bbl drop in WTI crude prices, back under the $60 mark, though USD-CAD sellers emerged ahead of the pairing's 200-day moving average at 1.3305. As oil prices turned higher again, USD-CAD headed under 1.3240 into the close.

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