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By XE Market Analysis September 25, 2020 3:17 pm
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    XE Market Analysis: Asia - Sep 25, 2020

    The DXY printed fresh trend high of 94.74 in N.Y. on Friday, marking its sixth-straight higher daily high. Incoming U.S. data was light, though the durable orders outcome missed the mark, but had little lasting impact. Wall Street was extremely choppy through the session, as COVID, stimulus and election concerns kept investors off balance, though the major indices rallied to close higher in afternoon trade. Treasury yields continued to edge lower into the weekend, dismissing the bounce on Wall Street as caution prevailed. EUR-USD opened at 1.1644 highs, later dipping to trend lows of 1.1612, as USD-JPY rallied from 105.40 to 105.70. USD-CAD matched trend highs at 1.3418, up from 1.3368, while GBP-USD topped at 1.2751, later falling to 1.2688 before heading back over 1.2730.

    [EUR, USD]
    EUR-USD printed new two-month lows of 1.1612 into the London close, now putting in five-consecutive sessions of lower daily lows. Save-haven flows into the Dollar have continued, as Europe's COVID spike appears to be getting worse, even as Deaths so far have not increased as quickly as cases. Nonetheless, talk of further restrictions and lockdowns is increasing, with the latest having Spain's government pushing to lockdown Madrid. France and the U.K. meanwhile, posted their highest number of cases ever on Thursday. The U.S. is no where close to being in the clear, but the percent rise in cases has been considerable slower than in Europe. Signs of economic slowing in Europe will likely keep EUR-USD on a path lower.

    [USD, JPY]
    USD-JPY rallied everyday this week, up to highs of 105.70 earlier, from early lows of 105.46. The pairing had come from Monday's base of 104.00, and has been driven by a resurgence in Dollar strength, leaving the DXY at two-month highs. The pairing has since pulled back into the 105.55 region, with end-of-week profit taking seen as the driver. USD-JPY support is now at the overnight low of 105.24, with resistance at the September 15 high of 105.81.

    [GBP, USD]
    Cable bottomed at 1.2688 lows in N.Y. trade, after falling from 1.2792 in London morning dealings, as the USD continued to rise. There is a palpable risk that only a bare bones trade deal will be reached, and a possibility that the UK will leave the single market at year-end with no deal at all. In either of these scenarios, negotiations would continue next year, so the matter won't be closed, but the near- to medium-term impact on the UK could be significant. Aside from Brexit, new Covid cases have been surging in the UK and Europe, with new national restrictions are in force in the UK. The modified wage support scheme has been some relief, though it is more frugal and targeted than the furlough scheme, which expires next month.

    [USD, CHF]
    EUR-CHF continued to trade on either side of 1.0800 in N.Y. on Friday, after touching a near three-week high of 1.0821 overnight. The SNB left policy setting unchanged Thursday, with the 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 took a look at Thursday's seven-week high of 1.3418 highs, eventually matching that level, up from opening lows of 1.3368. The rally comes as the USD continues to grind higher against its major peers. Oil prices have remained steady on either side of the $40.00 mark through the session not appearing to have much impact on the CAD. COVID concerns in Canada are increasing as the growth rate in cases is clocked at up 83% over the past 2-weeks, according to N.Y. Times data. In addition, Canadian politics may be adding weight to the CAD, as the minority Liberal government may face a no-confidence vote following the "Throne Speech" earlier in the week. At least one of the three major opposition parties will need to support the Liberals, or the government will fall. A USD-CAD move above Thursday's high brings the August 3 top of 1.3451 into view.

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