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By XE Market Analysis September 24, 2020 2:45 pm
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    XE Market Analysis: Asia - Sep 24, 2020

    The Dollar index printed new two-month highs of 94.59, later easing back to 94.27. USD profit taking set in as risk appetite shifted to positive from negative, after Treasury Secretary Mnuchin indicated further stimulus talks with Speaker Pelosi could be in the cards in the coming days. The action saw some unwinding of Dollar safe-haven flows. Wall Street turned initial losses into solid gains, though Treasury yields barely moved through the session. Incoming data was mixed, with initial jobless claims higher that expected, and new home sales soaring to levels last seen in 2006. Neither data point had much impact on the market. EUR-USD bottomed at 1/1626, later peaking at 1.1685, while USD-JPY chopped around between 105.32 and 105.52. USD-CAD pulled back from seven-week highs of 1.3418, later bottoming near 1.3330. GBP-USD meanwhile, opened near 1.2780, fell to 1.2708 before climbing back over 1.2770.

    [EUR, USD]
    EUR-USD printed fresh two-month lows of 1.1627 in early N.Y. trade, down from Asian highs of 1.1680. Since then, short covering into the London close took the pairing to 1.1670 highs, while further buying in afternoon trade saw the pairing print a 1.1685 peak. Rising COVID cases in much of Europe showed up in Wednesday's PMI data, with the services sector remaining under pressure due to the virus. This has weighed on the Euro generally, though Part of EUR-USD's recent declines have been driven by safe-haven USD demand, as risk-off conditions mostly prevail and as virus and political uncertainties remain in the U.S. Resistance comes in at 1.1700, with support at 1.1600, then the July 24 low of 1.11581.

    [USD, JPY]
    USD-JPY has been steady through the N.Y. session, opening at lows of 105.32, later topping at 105.52. The pairing managed an eight-session high of 105.53 ahead of the open, and an overnight low of 105.20. Dollar strength has remained in vogue, with the DXY putting in four-consecutive days of higher daily highs and lows. Going forward, given the USD and JPY tend to move in the same direction as risk-taking levels shift, USD-JPY price action will likely remain relatively muted as compared to other Dollar pairings.

    [GBP, USD]
    Cable remained comfortably above Wednesday's two-month low at 1.2674, bottoming at 1.2691. The pairing rallied into the N.Y. open, topping at 1.2782. The pound eased to 1.2708 in morning trade. Cable yesterday recouped some lost ground on news that the UK government is planning to extend, most likely in a modified form, its wage support scheme, which is due to expire next month, and which will be part of a wider emergency support package to help businesses through the new era of Covid restrictions that were announced on Wednesday, which may last for six months.

    [USD, CHF]
    EUR-CHF headed to 1.0810 highs on Thursday following the SNB policy announcement. The SNB left policy setting unchanged, with Deposit Rate and Libor target still at -0.75%. The central bank repeated that the franc is "highly valued" and said the bank is ready to "intervene more strongly in the foreign exchange market". The cross had been near 107.65 ahead of the Bank announcement, initially rallying to 1.079, then later in N.Y. to its highs. Markets wonder if the SNB had a hand in the move over 1.0800.

    [USD, CAD]
    USD-CAD rallied to 1.3418 highs in early North American trade, up from 1.3373 overnight lows. Aside from general USD strength, and slightly lower oil prices, the CAD remains pressured by a resurgence in coronavirus cases in Canada. PM Trudeau in a TV address yesterday evening indicated that a second wave of COVID had arrived in parts of Canada, saying “We’re on the brink of a fall that could be much worse than the spring." Aside from the virus, Trudeau's minority government could be in trouble going forward, as his spending plans, which include taxing the wealthy have prompted outcry from opposition parties. There is speculation now that Trudeau could be on the verge of a no-confidence vote, which if successful, would prompt a national election, which would likely put additional pressure on the CAD. Later in the session, oil prices perked up, and the unwinding of long USD positions set in as risk appetite improved, taking USD-CAD to lows near 1.3330.

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