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By XE Market Analysis September 29, 2020 2:51 pm
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    XE Market Analysis: Asia - Sep 29, 2020

    The Dollar was mixed and choppy in N.Y. trade on Tuesday, though the DXY ended the session under the 94.00 mark for the first time in four sessions. EUR-USD printed six-session highs of 1.1745, up from early lows of 1.1693. USD-JPY meanwhile, traded a narrow band between 105.53 and 105.70. USD-CAD stayed strong, as both softer oil prices and Covid outbreaks in Canada supported. GBP-USD chopped between 1.2903 and 1.2865. A much stronger U.S. September consumer confidence outcome had little market impact. Wall Street took a dive after NY reported a 3-plus percent positivity Covid infection rate, after sitting near 1% for months, prompting talk of further restrictions. This saw WTI crude to sell off, which weighed on stocks. Treasury yields were slightly lower.

    [EUR, USD]
    EUR-USD topped at six-session highs of 1.1745, up from pre-opening lows of 1.1682. Reports of real-money EUR-USD buying were heard early in the session, with talk of Euro repatriation ahead of tonight's presidential debate being the driver. It remains to be seen how much impact the debate will have on election sentiment, though if one or the other candidate is perceived to lose by a significant margin, there could be a shift in polling numbers, which may impact markets. EUR-USD resistance is at the September 22 high of 1.1772, then at the 20-day moving average at 1.1783. Support comes at 1.1615, Monday's low.

    [USD, JPY]
    USD-JPY printed a two-week high of 105.73 into the N.Y. open, up from overnight lows of 105.42. The pairing managed just a 105.53 to 10570 range through the session, as both the Dollar and Yen were pushed and pulled against each other given both having the tendency to move in the same direction on shifts in risk-taking levels. We look for further consolidation in the days ahead, perhaps until we see fresh U.S. fiscal stimulus, or perhaps even until the November U.S. election. For now, the 105.00 to 106.00 trading band looks set to hold.

    [GBP, USD]
    Cable traded a relatively narrow range through the N.Y. session, opening near 1.2865, before peaking at 1.2903, later bottoming at 1.2823. The lack of follow-through from Monday's outperformance suggests the market is retaining a measure of caution. Encouraging reports about EU and UK trade negotiations had underpinned. What remains unclear is how extensive a deal the two sides may come up with. There is potential for the pound to rally on any fresh signs of the two sides coming to an agreement. But, even with a trade deal in place, the UK will leave the EU's single market at year end and experience a drop in its terms of trade. A deal, unless a broad an comprehensive one, won't replicate the terms the UK has currently, and the country will lose much of the benefit from the 40 trade agreements the EU has with global economies. Downside risk remains for Sterling.

    [USD, CHF]
    EUR-CHF printed three-week highs of 1.0830 in N.Y. on Monday, though was unable to hold up, later falling to 107.75 lows. The pairing continues to struggle over the 1.0800 level, as it did again on Tuesday. The SNB left policy setting unchanged last week, 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 Thursday, initially rallying to 1.0790, 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 remained firm, trading to 1.3418 highs in early afternoon. The pairing matched the seven-week high seen on Friday. WTI crude prices took a dive under $39.00, down from overnight highs of $40.70, which supported the pairing through the morning, but a bounce in crude saw USD-CAD later retreat some under 1.3385. Covid remains at issue as well, with the province of Quebec yesterday announcing a 28-day partial lockdown in Montreal and Quebec City as cases there spike.

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