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By XE Market Analysis August 30, 2019 7:18 am
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    XE Market Analysis: North America - Aug 30, 2019

    The Dollar has continued to trade steady-to-firmer amid a backdrop of rallying global stock market. China's Foreign Ministry reaffirmed today that the U.S. and China are maintaining "effective communication." The rekindling of risk appetite has taken the perceived pressure off the Fed to ease aggressively, which in turn has buoyed up the Dollar. EUR-USD declined for what is now a sixth consecutive day, printing a one-month low at 1.1033. The Yen rebounded a little after declining quite sharply yesterday, losses which were concomitant with the revival in risk-back-on positioning. Japanese data today showed the jobless rate ebbing to its lowest level in 27 years in July, though this was offset by a somewhat paradoxical drop-off in retail sales, which fell at the quickest lace in over three years. The data had little bearing on forex markets, with the Japanese currency, being the No.1 currency safe haven of choice, almost exclusively taking its directional cues from the ebb and flow of risk appetite in the prevailing era of Trumpian trade warring. USD-JPY settled below the one-week high seen yesterday at 106.68. Sterling has been holding steady so far today, and is moderately down from week-ago levels versus the Dollar and Euro, which is a consequence of UK Prime Minister Johnson's "constitutional chicanery" (as one political pundit put it) in suspending parliament for an usually long period ahead of the October-31 Brexit deadline.

    [EUR, USD]
    EUR-USD has declined for what is now a sixth consecutive day, earlier printing a one-month low at 1.1033. Recent losses have mostly been driven by a broader firming in the U.S. currency. The rekindling of risk appetite in global markets this week has taken the pressure off the Fed, which helped the currency, although the Dollar had also been benefiting from strong international demand for Treasuries during last week's heightening in risk-off conditions. On the Euro's side of the scales, the ECB remains on course to increase monetary stimulus settings in September, while the risk of a no-deal Brexit, which has been amplified by the UK prime minister's move to suspend parliament yesterday, and which in the event would be detrimental to the Eurozone economy, is high on the "reasons to be concerned" side of the positional decision-making list of market participants. The no-deal Brexit risk was on the list of factors blamed for yesterday's record low in Hungarian forint. We retain a bearish view of EUR-USD. Resistance comes in at 1.1098-1.1100.

    [USD, JPY]
    The Yen has rebounded a little after declining quite sharply yesterday, losses which were concomitant with a pickup in risk appetite in global markets. Japanese data today showed the jobless rate ebbing to its lowest level in 27 years in July, but this was offset by a somewhat paradoxical drop-off in retail sales, which fell at the quickest lace in over three years. The data had little bearing on forex markets, with the Japanese currency, being the currency safe haven of choice, almost exclusively taking its directional cues from the ebb and flow of risk appetite in the prevailing era of Trumpian trade warring. USD-JPY has settled below the one-week high seen yesterday at 106.68. A series of former daily highs between this level and 106.78 mark out a horizontal resistance zone. The pair is up by some 2% from the 34-month low that was seen last week at 104.45. While sentiment in global markets has improved this week, there still remains a skittish undertone as prospects for a thawing in U.S.-China relations seem limited. The Trump administration's agenda appears to be one of containment rather than the mere seeking of improved trading terms, while the insistence of Beijing on the U.S. to not implement new tariffs looks to have fallen on deaf ears. The risk of a disorderly no-deal Brexit on October 31 is also in the mix.

    [GBP, USD]
    Sterling has settled after plunging yesterday on news of the UK prime minister's move to suspend Parliament. This has generated a political storm given the timing of it, though the government is operating within the rules. Opposition parties now look certain to attempt to bring down the government by a confidence vote as soon as next week. Cable has settled near 1.2200 after yesterday printing a six-day low at 1.2155.

    [USD, CHF]
    EUR-CHF has been in sideways and sometimes choppy range for two weeks now, holding above the 25-month low seen on August 15 at 1.0835. The low was a product of increased expectations for ECB monetary stimulus, and partly an increased safe haven premium being placed on the Swiss currency (despite the punishing -0.75% deposit rate). We expect the cross to remain heavy. While sentiment in global markets has improved this week, there remains a skittish undertone as prospects for a thawing in U.S.-China relations seem limited (the Trump administration's agenda appearing to be one of containment rather than the mere seeking of improved trading terms). The the risk of a disorderly no-deal Brexit on October 31 is also a negative for the Euro.

    [USD, CAD]
    USD-CAD printed a six-day high at 1.3319 during the Asian session today, which extended a rebound from the two-week low seen on Tuesday at 1.3225. The pairing has been lacking clear direction over the last three weeks, which follows an ascending phase out of the 10-month low seen in mid July at 1.3109. The evolution of the Trumpian trade war and its impact on the global economy will continue to have directional impact on USD-CAD given the Canadian Dollar's standing as a commodity currency. USD-CAD has support at 1.3270-73.

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