Home > XE Currency Blog > XE Market Analysis: Asia - Sep 30, 2020

AD

XE Currency Blog

Topics7440 Posts7485
By XE Market Analysis September 30, 2020 2:52 pm
    XE Market Analysis's picture
    XE Market Analysis Posts: 5364
    XE Market Analysis: Asia - Sep 30, 2020

    Risk-on conditions surged in N.Y. on Wednesday, resulting in a broadly lower Dollar, as safe-haven flows were partially reversed. Solid U.S. data, including a stronger ADP report, a firm Chicago PMI reading, and a surge in pending home sales all had had little impact on the FX market. Wall Street rallied sharply on hopes for a fiscal Covid stimulus package, while Treasury yields headed sharply higher. EUR-USD rallied from early lows of 1.1685 to 1.1752, while USD-JPY dropped from 105.75 to 105.40 before recovering slightly. USD-CAD fell under 1.3310 from opening highs of 1.3395. GBP-USD opened near 1.2815, later printing a 1.2943 highs. Thursday's U.S. economic calendar includes income and consumption, jobless claims, the manufacturing ISM and construction spending.

    [EUR, USD]
    EUR-USD topped at seven-session highs of 1.1755 during Asian hours, before making its way to 1.1685 lows in N.Y. morning trade. The pairing since recovered to 1.1752 as Wall Street rallied sharply, allowing some unwinding of safe-haven USD flows. We expect future Euro gains to be limited, given the sharp rise of Covid cases in Europe, which has led to additional restrictions, and could well snuff out the nascent recovery there. In addition, verbal intervention from ECB officials will likely deter some would-be EUR buyers. The 20-day moving average at 1.1775, then the 50-day moving average at 1.1797 mark EUR-USD resistance now.

    [USD, JPY]
    USD-JPY continued to trade inside relatively narrow ranges, though managed a better than two-week high of 105.80 in Asia, since falling back to 105.40 lows into the London close. The Dollar came under broad pressure through the N.Y. session, with risk-on conditions, led by hopes for a U.S. fiscal Covid package, weighing on the USD. The pairing found sellers on its brief move above the 50-day moving average, which currently sits at 105.79. We expect further consolidation between 105.00 and 106.00. The Dollar and Yen have been pushed and pulled against each other, given both having the tendency to move in the same direction on shifts in risk-taking levels.

    [GBP, USD]
    Cable rallied to eight-session highs of 1.2943 in N.Y. trade, up from opening lows of 1.2815. USD weakness was behind much of the bounce, though the third estimate of UK Q2 GDP came in slightly less horrendous than expected, at -21.5% y/y. Encouraging signs over EU and UK trade negotiations have recently given the pound an underpinning as well, though surging Covid cases in the U.K., and subsequent restrictions will likely limit Sterling gains going forward.

    [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 Wednesday. 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 eased from near two-month highs of 1.3420 seen overnight, trading to 1.3306 lows in afternoon North American trade. Oil prices recovered to the $40 mark, while the USD overall came under pressure, as safe-haven flows reversed out of the Greenback following the sharp Wall Street rally. The DXY has fell to seven-session lows of 93.67. These factors supported the CAD. From here, USD-CAD downside is expected to be limited going forward however, as Canada faces a second wave of Covid, with new cases there rivaling the peak in the spring, and restrictions being put back in place in Quebec, which has again taken the mantle as Canada's hotspot.

    Paste link in email or IM