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By XE Market Analysis September 18, 2020 3:08 pm
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    XE Market Analysis: Asia - Sep 18, 2020

    The Dollar ended a bit lower overall in N.Y. on Friday, though ranges were narrow, and volumes reportedly light into the weekend. Incoming U.S. data saw the Q2 current account blow out to a 12-year high, though Michigan sentiment was better than expected, and leading indicators were in line with consensus. The reports had little impact on the USD. Wall Street took another hit with tech selling again leading the way. Treasury yields were little changed. EUR-USD ranged between 1.1826 and 1.1870, while USD-JPY remained heavy, inside of a 104.29 to 104.50 trading band. USD-CAD opened near 1.3170, later peaking at 1.3209. GBP-USD started near 1.2990, later making its way to 1.2917 lows.

    [EUR, USD]
    EUR-USD rallied to intra day highs of 1.1870 in late N.Y. morning trade, up from early lows of 1.1826. Following the losses seen during the London morning session, pre-weekend short covering appears to have been a driver of the move higher. The Dollar overall is not performing well on Friday, which has seen the DXY fall to a seven-session low of 92.77. Bigger picture, with European officials fretting over further Euro strengthening, and the USD continuing to struggle to gain altitude, we can expect to see EUR-USD continue to trade inside about a roughly 1.1750 to 1.1900 band for now, as it has been doing for the past three-weeks.

    [USD, JPY]
    USD-JPY posted its fifth consecutive session of lower daily highs and lows, so far today falling from overnight highs of 104.87 to 104.27 into the N.Y. open. The pairing managed a bounce over 104.45 in early N.Y., but has faded back under 104.30 since. Risk-off is again in effect, and will likely continue to support the yen into the weekend. A break under the July 31 low of 104.18 would take the pairing to levels last seen since mid-March, when the pandemic was surging in Europe. USD-JPY hit a low of 101.18 on March 9.

    [GBP, USD]
    Cable topped at 1.3000 into the N.Y. open, a level that appears to becoming the upside line in the sand for now at least. It was downhill from there, with the pairing bottoming at 1.2917 after the London close. In the UK, coronavirus cases and corona-panic are surging. Localised lockdowns are now affecting 10 million people in the UK, and the government's scientific advisory group are, according to an FT report, advising the government to implement a two-week national lockdown. This is a negative backdrop for the pound, adding to the uncertainty surrounding the Brexit endgame, and with the minutes from the BoE MPC meeting yesterday affirming that the central bank is at full steam on contingency planning for negative interest rates.

    [USD, CHF]
    EUR-CHF has ebbed back to familiar levels in the 1.0700s after the latest drop back from forays above the 1.0800 level. The cross has repeatedly failed to sustain gains above 1.0800 over the last couple of months. The influence of the SNB's intervening hand may have been at play during the recent upside bursts.

    [USD, CAD]
    USD-CAD ran up from opening levels near 1.3170 to 1.3201 highs, as oil prices lipped early in the session. WTI crude has since rebounded back over $41.30, allowing USD-CAD to dip into the 1.3175 level again. Later, USD-CAD appeared to react to a pullback in WTI prices, resulting in the pairing heading to intra day highs of 1.3209 from near 1.3175. Profit taking in oil was the likely cause of the downturn in crude, and the USD-CAD move was likely exacerbated by a thin Friday afternoon CAD market.The pairing roughly ranged between 1.3150 and 1.3250 all week, tending to find support at its 20-day moving average, which is currently at 1.3143. Oil prices remain the key to USD-CAD's direction going forward, with the CAD and crude prices remaining fairly highly correlated.

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