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By XE Market Analysis May 20, 2020 2:16 pm
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    XE Market Analysis Posts: 5061
    XE Market Analysis: Asia - May 20, 2020

    The DXY fell to near three-week lows of 99.01 on morning trade on Wednesday, later recovering some lost ground, and retracing to near 99.25. Wall Street rallied, and Treasury yields inched higher, as hopes for economic recovery set in. There were no data of noted. EUR-USD rallied to 1.0999, up from 1.0950, later heading back under 1.0975. USD-JPY slipped from 107.70 to 107.34, before bouncing to 107.56. USD-CAD ranged between 1.3868 and 1.3924. Cable meanwhile, topped at 1.2287 before selling off to 1.2226 lows.

    [EUR, USD]
    EUR-USD traded to near three-week highs of 1.0999, up from early lows of 1.0950. The pairing has since back away from the 1.1000 level, with light profit taking seeing the Euro slip back to 1.0975. EUR-USD has put in four straight days of gains, with the move largely coming as USD safe-haven demand has ebbed now that economies are beginning to open up again. EUR-USD support comes at the 50-day moving average at 1.0900, with resistance up at 1.1000, a psych level, then at 1.1017, which marks the 200-day moving average.

    [USD, JPY]
    USD-JPY printed intra day lows of 107.34, in late-morning, down from overnight highs of 107.98. The pairing has been on a slow decline since the end of the Asian session. Persistent USD weakness, which has seen the DXY hit lower daily lows for the past four-sessions has weighed on USD-JPY, despite the risk-on backdrop seen on Wednesday. Support is now at 107.00, with resistance at the 50-day moving average of 107.83.

    [GBP, USD]
    Cable lifted out of the lower 1.2200s, reaching an intraday high at 1.2287 in early N.Y., later easing back under 1.2230. The pair remains in the lower reaches of a consolidation range that's been enduring since April, which followed the recovery from the 35-year low seen in March at 1.1409. We expect the pound's upside potential to remain curtailed for now, given risk of the UK leaving its post-Brexit membership of the EU's single market at year-end.

    [USD, CHF]
    EUR-CHF pulled back from the two-month highs of 1.0662 seen on Monday, though remained over the 1.06 mark through much of the session. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

    [USD, CAD]
    USD-CAD faded to 1.3868 lows, just above Tuesday's May low of 1.3867, and down from 1.3950 highs seen in London morning trade. The usual suspects supported the CAD through the morning, including still firm oil prices, and a risk-on backdrop. Canada's rather cool April CPI report had little FX impact, as markets continue to look through horrible data during the pandemic. USD-CAD later bounced over 1.3920 as oil prices faded lower. The April 30 low of 1.3850 is next support, and reports of sell-stops under the level have been rumored.

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    Topics7137 Posts7182
    By XE Market Analysis May 20, 2020 7:15 am
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      XE Market Analysis Posts: 5061
      XE Market Analysis: North America - May 20, 2020

      The dollar majors have been seeing narrow ranges while commodity currencies have lifted. Stock markets flagged somewhat in Asia and Europe, though S&P 500 futures have rallied by over 1%, pointing to a reversal of yesterday's losses at the open of Wall Street today. There remains a level of dissonance in market sentiment, between the reopening of locked-down economies on the one hand, and tensions between the U.S. and China and Australian and China (which are translating into tariffs on trade) on the other. Regarding Aussie vs China spat, an editorial in China's state-controlled Global Times today described Australia as being a "giant kangaroo that serves as a dog to the U.S.". Markets have also been dealt a lesson in placing too much optimism in a quick vaccine solution to the coronavirus pandemic. Overall, the momentum of reopening economies is maintaining a sense of optimism in markets. Incoming data to Japan (Tankan business survey and machinery orders), Australia (retail sales) and the UK and Eurozone (inflation), have had little impact, with markets remaining desensitized to data as investors try an fathom the scope for economic rebound as economies reopen. China said that 95.4% of major industrial firms employees have now returned to work, while Japan's deputy head of the coronavirus panel warned of a possible new wave of infections before winter. In currencies, EUR-USD traded slightly firmer, to levels around 1.0950-60, but remained shy of the 16-day high seen Tuesday at 1.0977. USD-JPY posted a sub-40-pip range in the upper 107.00s. AUD-USD rallied to a fresh 10-week high at0.6578. The New Zealand dollar outperformed after RBNZ Governor Orr said he is not considering going negative with interest rates at this juncture. NZD-USD surged to a nine-day peak at 0.6138. USD-CAD remained heavy after yesterday printing a three-week low at 1.3864. Front-month WTI prices consolidated lower from the nine-week high seen yesterday at $33.44.

      [EUR, USD]
      EUR-USD has traded slightly firmer today, to levels in the mid 1.0900, but the pair has remained shy of the 16-day high seen Tuesday at 1.0977. The common currency found domestically-driven support yesterday from rare good-news from the data front, with the forward-looking German ZEW investor confidence for May surging back to a 51.0 headline reading -- the highest since April 2015 -- after the 28.2 outcome in April and the -49.5 low that was seen in March. The current conditions component of the survey still reached a new low of -93.4, however, while today's release of final Eurozone inflation data was revised down to just 0.3% y/y. On the U.S. side of the pond today, the FOMC minutes from the April 28th-29th policy meeting are due, but we doubt there will be any fresh revelations as the Fed is "all-in." The markets will look to see if there's any leaning toward negative rates, though we doubt it. There's also Fedspeak from Bostic and Bullard. The data slate is light, with just weekly MBA mortgage and oil inventory figures up. EUR-USD continues to trade in a broad consolidation range near the halfway mark of the volatile range that was seen during the height of the global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect the pair to lack sustained directional bias for now. There is little divergence in central bank policy currently, with both the ECB and the Fed pursuing aggressively accommodative policy, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Both are amid the early stages or reopening from lockdowns.

      [USD, JPY]
      USD-JPY has posted a sub-40-pip range in the upper 107.00s so far today (as of the early London PM session). The yen has seen little direction against the euro, and other currencies, though has declined against the outperforming commodity currencies. NZD-JPY, for instance, lifted into three-week high territory. Stock markets have been choppy amid the dissonance between the reopening of locked-down economies and tensions between the U.S. and China and Australian and China (which are translating into tariffs on trade). Markets have also been dealt a lesson in placing too much optimism in a quick vaccine solution to the coronavirus pandemic. Incoming data out of Japan, which today included the latest quarterly Tankan business survey (which unsurprisingly showed sentiment to be at a decade low) and March machinery orders (which were less worse than expected in contracting by just 0.4% m/m, though this is a notoriously volatile month-to-month data series), had little market impact. Other recent data out of Japan showed March final confirming industrial production to have contracted 3.7% m/m, while Japanese Q1 GDP numbers confirmed that Japan is deep in recession, although slightly better than expected at -1.9% q/q. Markets have long been desensitized to incoming data, which currently is largely showing a backward-looking snapshot of economies in lockdown. Japan's deputy head of the coronavirus panel warned of a possible new wave of infections before winter. The principal driven of yen direction will continue to be global stock market direction, to which the yen has an enduring negative correlation with.

      [GBP, USD]
      Cable logged a six-day high at 1.2268, extending the rebound from the seven-and-a-half-week low that was seen yesterday at 1.2075. The pound has also seen gains versus the euro and yen, while holding its own against the outperforming commodity currencies. The UK currency has been apt to correlate positively with global stock market direction over the period of the pandemic so far. UK labour market data out today revealed a massive 856.5k spike in jobless claims in April, reflecting the impact of the lockdown, while the figures for March employment cover a period preceding the lockdown (which began on March 23rd in the UK), and showed the unemployment rate actually dipping, to a rate of 3.9% from 4.0% in February. Average household earnings data also preceded the lockdown, and showed a dip to a growth rate of 2.4% y/y in the three months to March in the with-bonus figure, down from 2.8% y/y in the three months to February.

      [USD, CHF]
      The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

      [USD, CAD]
      USD-CAD has remained heavy after yesterday printing a three-week low at 1.3864. The prospective for the Canadian dollar appears to be of the bullish variety given the currency's link with oil prices. Front-month WTI prices, while consolidating at slightly softer levels today, yesterday hit a nine-week high at $33.44. The high was seen after the American Petroleum Association reported a 4.8 mln barrel draw on crude inventories in the world's biggest economy in the week ending May 15th, contrary to the median forecast for a 2.4 mln barrel inventory build. This evidenced the impact of both oil output cuts by both U.S. producers and members of the OPEC+ group, along with rising demand as major economies reopen from lockdown (which has seen a massive increase in traffic, among other oil-consuming activities). We remain bullish on the Canadian dollar, which continues to trade at a discount following the sharp drop in oil prices over the March-April period. The April-30th low at 1.3848 provides a downside waypoint for Canadian dollar bulls, marking the lowest point the pair has traded since mid March. We see scope for a return to levels around 1.3500.

      XE Currency Blog

      Topics7137 Posts7182
      By XE Market Analysis May 20, 2020 4:15 am
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        XE Market Analysis Posts: 5061
        XE Market Analysis: Europe - May 20, 2020

        Directionally challenged have been the major dollar pairings and associated cross rates so far today, which has come against a backdrop of flagging stock markets, although S&P 500 futures have managed a 0.5% gain in overnight trading after the cash version of the index close on Wall Street yesterday with a 1.05% loss. Optimism in markets has been suppressed by a reality-check on the scope for a vaccine for the SARS Cov-2 coronavirus has weighed on sentiment, along with the continued bubbling of tensions between the U.S. and China, and Australia and China (an editorial in China's state-controlled Global Times today described Australia as being a "giant kangaroo that serves as a dog to the U.S."). Incoming data to Japan (Tankan business survey and machinery orders), Australia (retail sales) and the UK (inflation), have had little impact, with markets remaining desensitized to data as investors try an fathom the scope for economic rebound as economies reopen. China said that 95.4% of major industrial firms employees have now returned to work, while Japan's deputy head of the coronavirus panel warned of a possible new wave of infections before winter. In currencies, EUR-USD traded slightly firmer, to levels near 1.0950, but remained comfortably shy of the 16-day high seen Tuesday at 1.0977. USD-JPY posted little more than a 30-pip range in the upper 107.00s. AUD-USD held steady, below the 10-week high that was seen yesterday at 0.6586. The New Zealand dollar lifted after RBNZ Governor Orr said he is not considering going negative with interest rates at this juncture, though NZD-USD remained a couple of pips shy of the eight-day high seen yesterday at 0.6120. NZD-JPY posted a three-week high. USD-CAD remained heavy after yesterday printing a three-week low at 1.3864. Front-month WTI prices consolidated lower from the nine-week high seen yesterday at $33.44. Sterling took a moderate rotation lower against the dollar, euro and other currencies, correcting after rising over the previous two sessions.

        [EUR, USD]
        EUR-USD traded slightly firmer, to levels near 1.0950, but remained comfortably shy of the 16-day high seen Tuesday at 1.0977. The common currency found domestically-driven support yesterday from rare good-news from the data front, with the forward-looking German ZEW investor confidence for May surging back to a 51.0 headline reading -- the highest since April 2015 -- after the 28.2 outcome in April and the -49.5 low that was seen in March. The current conditions component of the survey still reached a new low of -93.4, however. EUR-USD continues to trade in a broad consolidation range near the halfway mark of the volatile range that was seen during the height of the global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect the pair to lack sustained directional bias for now. There is little divergence in central bank policy currently, with both the ECB and the Fed pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures.

        [USD, JPY]
        USD-JPY has posted little more than a 30-pip range in the upper 107.00s so far today (as of the early London AM session). The yen has seen little direction against other currencies, too, consolidating recent losses that reflected an unwinding in the Japanese currency's safe-haven premium. Optimism in markets has been suppressed by a reality-check on the scope for a vaccine for the SARS Cov-2 coronavirus has weighed on sentiment, along with the continued bubbling of tensions between the U.S. and China, and Australia and China (an editorial in China's state-controlled Global Times today described Australia as being a "giant kangaroo that serves as a dog to the U.S."). Incoming data to Japan, which today included the latest quarterly Tankan business survey (which unsurprisingly showed sentiment to be at a decade low) and March machinery orders (which were less worse than expected in contracting by just 0.4% m/m, though a notoriously volatile month-to-month data series), had little market impact. Other recent data out of Japan showed March final confirming industrial production to have contracted 3.7% m/m. Japanese Q1 GDP numbers, released yesterday, confirmed that Japan is deep in recession, although slightly better than expected at -1.9% q/q. Markets have long been desensitized to incoming data, which currently is largely showing a backward-looking snapshot of economies in lockdown. Japan's deputy head of the coronavirus panel warned of a possible new wave of infections before winter. The principal driven of yen direction will continue to be global stock market direction, to which the yen has an enduring negative correlation with.

        [GBP, USD]
        Sterling took a moderate rotation lower against the dollar, euro and other currencies, correcting after rising over the previous two sessions. Cable ebbed to the lower 1.2200s, down from the one-week high that was seen yesterday at 1.2297. UK April CPI, released first thing in London, fell to a 0.8% y/y rate, the lowest level seen since August 2016 and down from 1.5% y/y in March. The outcome slightly undershot the median forecast for 0.9% y/y. Not surprisingly, falling energy and fuel pump prices contributed the biggest downward components to the shift in headline inflation, with core CPI consequently declining more moderately, to a rate of 1.4% y/y, from 1.6% y/y in the month prior, matching the median expectation. The rebound in oil prices over the last month, coupled with reopening economies, should put the brakes on the disinflationary trend. The pound will continue to take most of its directional cues from broad direction in global stock markets (to which the UK currency has been correlating positively with over the pandemic crisis era so far) and developments on the UK-EU trade negotiation front. We expect the pound's upside to be limited given risk of the UK leaving its post-Brexit membership of the EU's single market at year-end. Negotiations between the UK and EU are coming to a head, with less than a month-and-a-half until the July-1st deadline for the UK to decide whether it wants to extended is post-Brexit transition membership of the EU's single market (which includes 40 free-trade deals with global economies) beyond year-end.

        [USD, CHF]
        The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

        [USD, CAD]
        USD-CAD has remained heavy after yesterday printing a three-week low at 1.3864. The prospective for the Canadian dollar appears to be of the bullish variety given the currency's link with oil prices. Front-month WTI prices, while consolidating at slightly softer levels today, yesterday hit a nine-week high at $33.44. The high was seen after the American Petroleum Association reported a 4.8 mln barrel draw on crude inventories in the world's biggest economy in the week ending May 15th, contrary to the median forecast for a 2.4 mln barrel inventory build. This evidenced the impact of both oil output cuts by both U.S. producers and members of the OPEC+ group, along with rising demand as major economies reopen from lockdown (which has seen a massive increase in traffic, among other oil-consuming activities). We remain bullish on the Canadian dollar, which continues to trade at a discount following the sharp drop in oil prices over the March-April period. The April-30th low at 1.3848 provides a downside waypoint for Canadian dollar bulls, marking the lowest point the pair has traded since mid March. We see scope for a return to levels around 1.3500.

        XE Currency Blog

        Topics7137 Posts7182
        By XE Market Analysis May 19, 2020 3:14 pm
          XE Market Analysis's picture
          XE Market Analysis Posts: 5061
          XE Market Analysis: Asia - May 19, 2020

          The Dollar was fairly steady overall on Tuesday in N.Y., after losing ground Monday, and through much of the overnight session. Hopes for reopening global economies following positive Vaccine news on Monday removed some safe-haven urgency for buying the USD. For data, April housing starts were worse than forecast, but as has been the case of late, markets looked through the data. EUR-USD peaked at 1.0976, later falling to 1.0924 lows. USD-JPY topped at 108.09, before basing at 107.75. USD-CAD made its way under 1.3870 from early highs of 1.3935. GBP-USD meanwhile, rallied over 1.2295 from early lows under 1.2225.

          [EUR, USD]
          EUR-USD came off the boil after topping at 12-session highs of 1.0976, later bottoming at 1.0924 into the London close. The pairing has printed higher daily highs and lows for three-days running, as the Dollar's safe-haven status stalls as global economies attempt to reopen from virus quarantines. EUR-USD support comes at the 50-day moving average lat 1.0900, with resistance up at 1.1000, a psych level, then at 1.1017, which marks the 200-day moving average.

          [USD, JPY]
          USD-JPY topped at one-month highs of 108.09, up from overnight lows of 107.30. The safe-haven Yen has lost some shine as economies begin to reopen, and as hopes for a vaccine improve following Moderna's reports of promising drug trials. The pairing is above its 50-day moving average, currently at 107.78, which now becomes support, with resistance at 108.27, which represents the 200-day moving average.

          [GBP, USD]
          Cable printed one-week highs over 1.2270 after the London close, which extended the rebound from the near two-month low seen on Monday at 1.2075. UK labor market data revealed a massive 856.5k spike in jobless claims in April, reflecting the impact of the lock down, while the figures for March employment cover a period preceding the lock down (which began on March 23rd in the UK), and showed the unemployment rate actually dipping, to a rate of 3.9% from 4.0% in February. We expect the pound's upside to be limited given risk of the UK leaving its post-Brexit membership of the EU's single market at year-end.

          [USD, CHF]
          EUR-CHF pulled back from the two-month highs of 1.0662 seen on Monday, as risk-off conditions returned. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

          [USD, CAD]
          USD-CAD printed near three-week lows of 1.3874, with the CAD continuing to find support on the back of strengthening oil prices. WTI crude remains under Monday's two-month high of $33.32, but has retained the $31 handle through the session, a positive for the CAD. Hopes for the reopening of global economies, following positive news on the development of a virus vaccine, have seen safe-haven flows into the USD reverse to a degree, while Treasury yields have moved lower, also weighing on the pairing.

          XE Currency Blog

          Topics7137 Posts7182
          By XE Market Analysis May 19, 2020 7:44 am
            XE Market Analysis's picture
            XE Market Analysis Posts: 5061
            XE Market Analysis: North America - May 19, 2020

            The dollar has remained soft even though the strong stock market seen over the last day flagged during the European morning session. The euro, meanwhile, rallied against most currencies on rare good-news from the data front, with the forward-looking German ZEW investor confidence for May surging back to a 51.0 headline reading -- the highest since April 2015 -- after the 28.2 outcome in April and the -49.5 low that was seen in March. The current conditions component of the survey still reached a new low of -93.4, however. Another euro positive was proposals for a EUR 500 bln EU recovery fund. EUR-USD gained by over 0.5% in printing a 15-day high at 1.0957, extending the rebound from the 12-day low seen last week at 1.0776. This helped drive the narrow trade-weighted USD index to an eight-day low at 99.23. Cable logged a six-day high at 1.2268, extending the rebound from the seven-and-a-half-week low that was seen yesterday at 1.2075. The pound has also seen gains versus the euro and yen, while holding its own against the outperforming commodity currencies. AUD-USD posted an eight-day high at 0.6564, with the Aussie supported by the strong gains in equity markets over the last day, despite the moderate correction in Europe, and despite China confirming an 80% tariff on its imports of Australian barley. Beijing is also reportedly considering also targeting Australian wine and dairy, in response to Australia's accusations about China's role in the pandemic. USD-CAD edged out an eight-day low at 1.3905. USD-JPY rose to a one-week high at 107.60, driven by yen underperformance. Markets, on the one hand, are factoring reopening economies, developments on the vaccine front for the SARS Cov-2 coronavirus, and fresh pledges for further stimulus if necessary from the Fed, ECB and other central banks, and on the other, concerns about the ratcheting-up tensions between the U.S. and China, and Australia and China.

            [EUR, USD]
            EUR-USD has gained nearly 0.5% in printing a 15-day high at 1.0957, extending the rebound from the 12-day low seen last week at 1.0775. The latest up phase was facilitated by rare good-news from the data front, with the forward-looking German ZEW investor confidence for May surging back to a 51.0 headline reading -- the highest since April 2015 -- after the 28.2 outcome in April and the -49.5 low that was seen in March. The current conditions component of the survey still reached a new low of -93.4, however. EUR-USD had earlier been supported by broader dollar weakness as the currency saw some of its safe haven premium unwind amid a backdrop of rallying stock markets in Asia, which followed solid Wall Street gains yesterday, though European equities have since flagged, and S&P 500 futures are now showing modest losses. One the one hand, markets are factoring reopening economies, positive news on the development of a vaccine for the SARS Cov-2 coronavirus, and fresh pledges for further stimulus if necessary from the Fed, ECB and other central banks, and on the other, concerns about the ratcheting-up tensions between the U.S. and China, and Australia and China. EUR-USD continues to trade in a broad consolidation range near the halfway mark of the volatile range that was seen during the height of the global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect the pair to lack sustained directional bias for now. There is little divergence in central bank policy currently, with both the ECB and the Fed pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures.

            [USD, JPY]
            The yen has been weakening against most currencies today following the surge in global equity markets over the last day, and has remained soft even as equities in Europe flagged. USD-JPY rose to a one-week high at 107.60. The Japanese currency has seen a bigger magnitude of decline against the commodity currencies. Markets continue to largely overlook domestic developments in Japan. Data today showed March final confirming industrial production to have contracted 3.7% m/m. Japanese Q1 GDP numbers, released yesterday, confirmed that Japan is deep in recession, although slightly better than expected at -1.9% q/q. Markets have long been desensitized to incoming data, which currently is largely showing a backward-looking snapshot of economies in lockdown. Another 5.0-plus magnitude earthquake, this time near the Gifu prefecture, was reported today.

            [GBP, USD]
            Cable logged a six-day high at 1.2268, extending the rebound from the seven-and-a-half-week low that was seen yesterday at 1.2075. The pound has also seen gains versus the euro and yen, while holding its own against the outperforming commodity currencies. The UK currency has been apt to correlate positively with global stock market direction over the period of the pandemic so far. UK labour market data out today revealed a massive 856.5k spike in jobless claims in April, reflecting the impact of the lockdown, while the figures for March employment cover a period preceding the lockdown (which began on March 23rd in the UK), and showed the unemployment rate actually dipping, to a rate of 3.9% from 4.0% in February. Average household earnings data also preceded the lockdown, and showed a dip to a growth rate of 2.4% y/y in the three months to March in the with-bonus figure, down from 2.8% y/y in the three months to February.

            [USD, CHF]
            The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

            [USD, CAD]
            USD-CAD edged out an eight-day low at 1.3905, reflecting part broad weakness in the U.S. dollar and part outperformance in the Canadian dollar, which has been lifted by a backdrop of rallying global stock markets over the last day (despite a pull back in European markets). Front-month WTI oil prices have settled today a little off the nine-week high that was seen yesterday at $33.32. Oil prices are likely to remain support amid signs of dropping supply and rising output as global economies reopen from lockdowns. Last Friday, data showed operating U.S. oil and natural gas rigs to have fallen to a record low for a second consecutive week.

            XE Currency Blog

            Topics7137 Posts7182
            By XE Market Analysis May 19, 2020 3:44 am
              XE Market Analysis's picture
              XE Market Analysis Posts: 5061
              XE Market Analysis: Europe - May 19, 2020

              The dollar has remained soft amid a backdrop of rallying global stock markets, which are being buoyed by reopening economies, positive news on the development of a vaccine for the SARS Cov-2 coronavirus, and fresh pledges for further stimulus if necessary from the Fed, ECB and other central banks, factors which are managing to outweigh concerns about the ratcheting-up tensions between the U.S. and China, and Australia and China. The narrow trade-weighted USD index (DXY) fell to a 11-day low of 99.50, extending the decline from levels near 100.50 that has been seen over the last day. EUR-USD concurrently edged out a 15-day high at 1.0940. Cable logged a six-day high at 1.2268, extending the rebound from the seven-and-a-half-week low that was seen yesterday at 1.2075. The pound has also seen gains versus the euro and yen, while holding its own against the outperforming commodity currencies. The UK currency has been apt to correlate positively with global stock market direction over the period of the pandemic so far. AUD-USD posted an eight-day high at 0.6557, with the Aussie supported by the coursing risk-off backdrop in global markets and despite China confirming an 80% tariff on its imports of Australian barley, and with Beijing reportedly considering also targeting Australian wine and dairy in response to Australia's accusations about China's role in the pandemic. USD-CAD edged out a 14-day low at 1.3914. USD-JPY has been directionally challenged, carving out no more than a 15-pip range so far today, just below the one-week high that was seen yesterday at 107.51.

              [EUR, USD]
              EUR-USD edged out a 15-day high at 1.0940, underpinned by broader dollar weakness as the currency sees some of its safe haven premium unwind amid a backdrop of rallying global stock markets, which are being buoyed by reopening economies, positive news on the development of a vaccine for the SARS Cov-2 coronavirus, and fresh pledges for further stimulus if necessary from the Fed, ECB and other central banks. These factors have been managing to outweigh concerns about the ratcheting-up tensions between the U.S. and China, and Australia and China. The conflict between Germany's constitutional court and the ECB remains unresolved and could escalate further if the central bank continues to stretch the limits of its mandate in the quest to keep spreads in and prevent peripheral-state yields, particularly Italian, from rising. EUR-USD continues to trade in a broad consolidation range to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect the pair to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies, which is being accompanied by concerns that this might spark a second wave of coronavirus infections.

              [USD, JPY]
              USD-JPY has been directionally challenged, carving out no more than a 15-pip range so far today, just below the one-week high that was seen yesterday at 107.51. This reflects the fact that both currencies have been losing ground to most other currencies, especially the commodity currencies, amid a backdrop of rallying stock markets, which are being buoyed by reopening economies, positive news on the development of a vaccine for the SARS Cov-2 coronavirus, and fresh pledges for further stimulus if necessary from the Fed, ECB and other central banks, factors which are managing to outweigh concerns about ratcheting-up tensions between the U.S. and China, and Australia and China. The yen's weakness over the last day reflects an unwinding in its safe haven premium. Markets continue to largely overlook domestic developments in Japan. Data today showed March final confirming industrial production to have contracted 3.7% m/m. Japanese Q1 GDP numbers, released yesterday, confirmed that Japan is deep in recession, although slightly better than expected at -1.9% q/q. Markets have long been desensitized to incoming data, which currently is largely showing a backward-looking snapshot of economies in lockdown. Another 5.0-plus magnitude earthquake, this time near the Gifu prefecture, was reported today.

              [GBP, USD]
              Cable logged a six-day high at 1.2268, extending the rebound from the seven-and-a-half-week low that was seen yesterday at 1.2075. The pound has also seen gains versus the euro and yen, while holding its own against the outperforming commodity currencies. The UK currency has been apt to correlate positively with global stock market direction over the period of the pandemic so far. UK labour market data out today revealed a massive 856.5k spike in jobless claims in April, reflecting the impact of the lockdown, while the figures for March employment cover a period preceding the lockdown (which began on March 23rd in the UK), and showed the unemployment rate actually dipping, to a rate of 3.9% from 4.0% in February. Average household earnings data also preceded the lockdown, and showed a dip to a growth rate of 2.4% y/y in the three months to March in the with-bonus figure, down from 2.8% y/y in the three months to February.

              [USD, CHF]
              The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

              [USD, CAD]
              USD-CAD edged out a 14-day low at 1.3914, reflecting part broad weakness in the U.S. dollar and part outperformance in the Canadian dollar, which has been lifted by a backdrop of rallying global stock markets. Front-month WTI oil prices have settled today a little off the nine-week high that was seen yesterday at $33.32. Oil prices are likely to remain support amid signs of dropping supply and rising output as global economies reopen from lockdowns. Last Friday, data showed operating U.S. oil and natural gas rigs to have fallen to a record low for a second consecutive week.

              XE Currency Blog

              Topics7137 Posts7182
              By XE Market Analysis May 18, 2020 2:43 pm
                XE Market Analysis's picture
                XE Market Analysis Posts: 5061
                XE Market Analysis: Asia - May 18, 2020

                The Dollar was broadly lower on Monday, seeing safe-haven USD flows reverse on the back of a strong bout of risk-on. Stocks and yields headed higher following reports that pharma company Moderna's coronavirus vaccine shows positive signs of working. There was little in the way of incoming data, and the FX market largely focused on the improved risk backdrop. EUR-USD rallied from opening lows near 1.0820, later peaking over 1.0925. USD-JPY peaked at 107.50 before falling back to 107.21. USD-CAD fell sharply to 1.3956 after opening at 1.4050. GBP-USD meanwhile, rallied to 1.2227, after opening under 1.2120.

                [EUR, USD]
                EUR-USD broke out of its recent trading band. rallying to two-week highs of 1.0920, after opening near 1.0820. Risk-on saw some safe-haven Dollar flows reverse after Fed Chairman Powell warned that the Fed is not out of ammunition, and could do more, while warning that he wouldn't bet against the U.S. economy neither in the short nor the long run. Positive news on the vaccine front helped move risk taking levels higher as well. EUR-USD is well above its 20-day moving average at 1.0848, though has since dipped below its 50-day moving average at 1.0907.

                [USD, JPY]
                USD-JPY remained inside of a narrow, well-worn trading band to start the week, idling between opening lows of 107.26 and 107.50 highs through thee morning, later bottoming at 107.21. Risk-on conditions as witnessed by sharply higher equities, and firmed up Treasury yields provided some early support to the pairing, though broad USD selling eventually put some weight on USD-JPY. Bigger picture, further consolidation can be expected until we see a clearer path as to how global economies come back online. Support is at the 20-day moving average at 107.07, with resistance at the 50-day moving average at 107.73.

                [GBP, USD]
                Cable reversed higher in N.Y. trade, peaking at 1.2227 after printing a near eight-week low at 1.2076. The low was seen after BoE chief economist Haldane hinted that the central bank is considering going negative with its interest rate policy, and on news that the latest round of post-Brexit trade talks with the EU finished on Friday without offering much sign of encouragement. Lifting the pound has been the surge in global equity markets. A slew of UK data are due this week, starting with the monthly labor market report tomorrow, and including inflation figures on Wednesday and retail sales data later in the. A large spike in unemployment, a sharp drop in the inflation rate, and an unprecedented plunge in retail sales can be expected.

                [USD, CHF]
                EUR-CHF spiked to better than two-month highs of 1.0662 on Monday, with buy-stops tripped over 1.0611, which was the April 28 peak. A risk-on session drove the pairing. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

                [USD, CAD]
                USD-CAD printed lows of 1.3956, down from Asian session highs of 1.4107, marking the lowest level seen since May 11. The move has come in concert with WTI crude's 9% rally over $32.00/bbl, and the general risk-on backdrop. The pairing is back under its 50-day moving average at 1.4079, and its 20-day moving average at 1.4052. Support is at the May 11 low of 1.3900.

                XE Currency Blog

                Topics7137 Posts7182
                By XE Market Analysis May 18, 2020 8:12 am
                  XE Market Analysis's picture
                  XE Market Analysis Posts: 5061
                  XE Market Analysis: North America - May 18, 2020

                  The commodity currencies have traded firmer, concomitantly with a rise in stock markets, which posted moderate gains in Asia-Pacific markets and more robust gains in Europe, while S&P 500 futures have rallied by over 1.5%. This came after Fed Chairman Powell warned that the Fed is not out of ammunition, and could do more, while warning that he wouldn't bet against the U.S. economy neither in the short nor the long run. ECB chief economist Lane also said that the central bank can extend the PEPP programme in size and/or duration. Oil prices gained, with June WTI crude prices (on the last day before roll over to July contracts) hit a nine-week high at $31.24, buoyed by signs of dropping supply and rising output as global economies reopen from lockdowns. On Friday, data showed operating U.S. oil and natural gas rigs to have fallen to a record low for a second consecutive week. In currencies, AUD-USD lifted above 0.6458 after closing on Friday at 0.0.6415. USD-CAD ebbed to a low at 1.4056, down from Friday's close at 1.4110, though remaining above Friday's low at 1.4016. EUR-USD, meanwhile, plied a narrow range in the lower 1.0800s, and USD-JPY remained directionally immobile in the lower 107.0s. The pound extended losses seen last week, with Cable edging out a fresh near-eight-week-low at 1.2076 and EUR-GBP lifting to a seven-week high at 0.8960. BoE chief economist Haldane hinted that the central bank is considering going negative with its interest rate policy (the repo rate is currently at 0.25%). Also, the latest round of trade talks finished on Friday without offering much sign of encouragement, and with the UK government repeating again that it is prepared to walk away from negotiations. This maintains the risk that the UK might at year-end leave the post-Brext transition membership of the EU's single market without a new trade deal in place. In data, Japan Q1 GDP numbers confirmed that the country is deep in recession, although slightly better than expected at -1.9% q/q.

                  [EUR, USD]
                  EUR-USD has plied a narrow range so far on Monday in the lower 1.0800s. Fed Chairman Powell warned that the Fed is not out of ammunition, and could do more, while warning that he wouldn't bet against the U.S. economy neither in the short nor the long run. At the same time, ECB chief economist Lane said that the central bank can extend the PEPP programme in size and/or duration. The conflict between Germany's constitutional court and the ECB, meanwhile, remains unresolved and could escalate further if the central bank continues to stretch the limits of its mandate in the quest to keep spreads in and prevent peripheral-state yields, particularly Italian, from rising. EUR-USD continues to trade in a broad consolidation range to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect the pari to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone, along with the dollar's status as a safe haven in the pandemic crisis era, tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies, which is being accompanied by concerns that this might spark a second wave of coronavirus infections.

                  [USD, JPY]
                  USD-JPY remained directionally immobile in the lower 107.0s, while the Japanese currency lost ground to the commodity currencies, which rallied concomitantly with a fresh rise in global equity markets after Fed Chairman Powell warned that the Fed is not out of ammunition, and could do more, while warning that he wouldn't bet against the U.S. economy neither in the short nor the long run. Japanese Q1 GDP numbers confirmed that Japan is deep in recession, although slightly better than expected at -1.9% q/q. Markets have long been desensitized to incoming data, which currently is largely showing a backward-looking snapshot of economies in lockdown. The combo of tensions between the U.S. and China, and fears of a second wave of coronavirus infections as economies reopen, looks set to maintain the prospect of continued bouts of risk-off positioning, which in turn should be supportive of the yen versus most other currencies.

                  [GBP, USD]
                  The pound extended losses seen last week, with Cable edging out a fresh near-eight-week-low at 1.2076 and EUR-GBP lifting to a seven-week high at 0.8960. BoE chief economist Haldane hinted that the central bank is considering going negative with its interest rate policy (the repo rate is currently at 0.1%). Also, the latest round of trade talks finished on Friday without offering much sign of encouragement. The UK'c chief Brexit negotiator, David Frost, said that there was "very little progress towards agreement on the most difficult outstanding issues," claiming that the EU were making "novel and unbalanced proposals," and that the list of its demands were unprecedented in previous EU trade deals (though the EU would argue that the UK is asking an unprecedented level of access to the single market in return). UK government repeated, once again, that it is prepared to walk away from negotiations. This maintains the risk that the UK might at year-end leave the post-Brext transition membership of the EU's single market without a new trade deal in place, which would entail a large part of UK trade shifting to less favourable WTO terms.

                  [USD, CHF]
                  The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

                  [USD, CAD]
                  USD-CAD ebbed to a low at 1.4063, down from Friday's close at 1.4110, though remaining above Friday's low at 1.4016. The decline reflected demand for the Canadian currency, which, like other oil-correlating currencies was boosted by a fresh gain in oil prices. June WTI crude prices (on the last day before roll over to July contracts) hit a nine-week high at $31.24, buoyed by signs of dropping supply and rising output as global economies reopen from lockdowns. On Friday, data showed operating U.S. oil and natural gas rigs to have fallen to a record low for a second consecutive week.

                  XE Currency Blog

                  Topics7137 Posts7182
                  By XE Market Analysis May 18, 2020 4:41 am
                    XE Market Analysis's picture
                    XE Market Analysis Posts: 5061
                    XE Market Analysis: Europe - May 18, 2020

                    The commodity currencies have traded firmer, concomitantly with a rise stock markets, which have posted moderate gains in Asia-Pacific markets, while S&P 500 futures have rallied by over 1%. This came after Fed Chairman Powell warned that the Fed is not out of ammunition, and could do more, while warning that he wouldn't bet against the U.S. economy neither in the short nor the long run. ECB chief economist Lane also said that the central bank can extend the PEPP programme in size and/or duration. Oil prices gained, with June WTI crude prices (on the last day before roll over to July contracts) hit a nine-week high at $31.24, buoyed by signs of dropping supply and rising output as global economies reopen from lockdowns. On Friday, data showed operating U.S. oil and natural gas rigs to have fallen to a record low for a second consecutive week. In currencies, AUD-USD lifted above 0.6450 after closing on Friday at 0.0.6415. USD-CAD ebbed to a low at 1.4063, down from Friday's close at 1.4110, though remaining above Friday's low at 1.4016. EUR-USD, meanwhile, plied a narrow range in the lower 1.0800s, and USD-JPY remained directionally immobile in the lower 107.0s. The pound extended losses seen last week, with Cable edging out a fresh near-eight-week-low at 1.2076 and EUR-GBP lifting to a seven-week high at 0.8960. BoE chief economist Haldane hinted that the central bank is considering going negative with its interest rate policy (the repo rate is currently at 0.1%). Also, the latest round of trade talks finished on Friday without offering much sign of encouragement, and with the UK government repeating again that it is prepared to walk away from negotiations. This maintains the risk that the UK might at year-end leave the post-Brext transition membership of the EU's single market without a new trade deal in place. In data, Japan Q1 GDP numbers confirmed that the country is deep in recession, although slightly better than expected at -1.9% q/q.

                    [EUR, USD]
                    EUR-USD has plied a narrow range so far on Monday in the lower 1.0800s. Fed Chairman Powell warned that the Fed is not out of ammunition, and could do more, while warning that he wouldn't bet against the U.S. economy neither in the short nor the long run. At the same time, ECB chief economist Lane said that the central bank can extend the PEPP programme in size and/or duration. The conflict between Germany's constitutional court and the ECB, meanwhile, remains unresolved and could escalate further if the central bank continues to stretch the limits of its mandate in the quest to keep spreads in and prevent peripheral-state yields, particularly Italian, from rising. EUR-USD continues to trade in a broad consolidation range to the south of the halfway mark of the volatile range that was seen during the height of global market panic in March, which was marked by 1.0637 on the downside and 1.1494 on the upside. We expect the pari to lack sustained directional bias for now, though the somewhat frayed politics of the eurozone, along with the dollar's status as a safe haven in the pandemic crisis era, tips the balance toward downside risk. There is little divergence in central bank policy currently, with both the ECB and the Fed are pursuing aggressive easing policies, with both Europe and the U.S. facing significant economic headwinds from virus-containing lockdown measures. Europe and the U.S. are now in the early stages of economic reopening strategies, which is being accompanied by concerns that this might spark a second wave of coronavirus infections.

                    [USD, JPY]
                    USD-JPY remained directionally immobile in the lower 107.0s, while the Japanese currency lost ground to the commodity currencies, which rallied concomitantly with a fresh rise in global equity markets after Fed Chairman Powell warned that the Fed is not out of ammunition, and could do more, while warning that he wouldn't bet against the U.S. economy neither in the short nor the long run. Japanese Q1 GDP numbers confirmed that Japan is deep in recession, although slightly better than expected at -1.9% q/q. Markets have long been desensitized to incoming data, which currently is largely showing a backward-looking snapshot of economies in lockdown. The combo of tensions between the U.S. and China, and fears of a second wave of coronavirus infections as economies reopen, looks set to maintain the prospect of continued bouts of risk-off positioning, which in turn should be supportive of the yen versus most other currencies.

                    [GBP, USD]
                    The pound extended losses seen last week, with Cable edging out a fresh near-eight-week-low at 1.2076 and EUR-GBP lifting to a seven-week high at 0.8960. BoE chief economist Haldane hinted that the central bank is considering going negative with its interest rate policy (the repo rate is currently at 0.1%). Also, the latest round of trade talks finished on Friday without offering much sign of encouragement, and with the UK government repeating again that it is prepared to walk away from negotiations. This maintains the risk that the UK might at year-end leave the post-Brext transition membership of the EU's single market without a new trade deal in place.

                    [USD, CHF]
                    The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages. A rise in sight deposits (money held by commercial banks) can suggest the francs turning up after being sold by the central bank. The 1.0500 level in EUR-CHF, while not a fixed floor, has clearly been a line in the sand of the SNB. The Swiss central bank has a long history of intervening to either limit of slow the pace of appreciation in its currency, which normally comes during periods of risk aversion in global markets and/or euro underperformance. From 2011 through to 2015, the SNB capped the franc via a 1.2000 floor in EUR-CHF. When the cap was abandoned in January 2015, the franc rallied by 30%, having become unfeasible for the SNB to counter the ECB's expansive monetary policies. A similar circumstance is afoot today, with the ECB maintaining expansive polices following a period of safe haven demand for the franc. In January, the U.S. added Switzerland to its list of currency manipulators. The move seemed a bit harsh given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argued that Switzerland should pursue a more expansive fiscal policy as a remedy.

                    [USD, CAD]
                    USD-CAD ebbed to a low at 1.4063, down from Friday's close at 1.4110, though remaining above Friday's low at 1.4016. The decline reflected demand for the Canadian currency, which, like other oil-correlating currencies was boosted by a fresh gain in oil prices. June WTI crude prices (on the last day before roll over to July contracts) hit a nine-week high at $31.24, buoyed by signs of dropping supply and rising output as global economies reopen from lockdowns. On Friday, data showed operating U.S. oil and natural gas rigs to have fallen to a record low for a second consecutive week.

                    XE Currency Blog

                    Topics7137 Posts7182
                    By XE Market Analysis May 15, 2020 2:38 pm
                      XE Market Analysis's picture
                      XE Market Analysis Posts: 5061
                      XE Market Analysis: Asia - May 15, 2020

                      The Dollar fell early in the N.Y. Friday session, as sellers stepped in following the abysmal U.S. retail sales and industrial production data. The DXY fell from 100.49 to 100.09, though later rebounding to 100.47 highs on pre-weekend USD short covering. Wall Street sold off at the open on the back of ramping up tensions between the U.S. and China, though later turned positive as the U.S. rolled out a coronavirus vaccine project. EUR-USD rallied from 1.0790 to 1.0850 early, later falling back to lows under 1.0805. USD-JPY touched 106.86 lows after the data, before heading to 107.37. USD-CAD dipped under 1.4055, before rallying to 1.4114 highs, while GBP-USD printed two-month lows of 1.2115.

                      [EUR, USD]
                      EUR-USD was again range bound on Friday, remaining inside of the week's trading band. The Euro gained some ground following the horrible U.S. retail sales and industrial production, heading to 1.0850 highs from opening lows near 1.0790, though later settled back under 1.0810 after the London close. Big picture, the pairing remains inside of recent trading ranges, and until a clearer view of the re-opening of economies becomes evident, more of the same is anticipated.

                      [USD, JPY]
                      USD-JPY rallied to N.Y. session highs over 107.35, up from post-retail sales lows of 106.86. Pre-weekend short covering was a driver behind the modest move higher, which was limited by today's risk-off backdrop. Losses earlier in the week came as Treasury yields sagged after Fed Chair Powell painted a glum economic picture going forward. Overall, USD-JPY has remained inside an about 106.00 to 108.00 trading band for the better part of a month, and until markets get a better picture of how global economies re-open, the pairing is liable to remain range-bound.

                      [GBP, USD]
                      The Pound underperformed, once again proving sensitive to selling in U.S. and global stocks. Cable dropped by over 0.5% in printing its lowest level since March 26th, at 1.2114. Cable has now racked up a fifth consecutive day of lower lows. The UK's high coronavirus infection rate, and high death total, has meant the country is behind the pack in terms of reopening its economy. This, along with the UK's open economy and high current account deficit and the continued risk of the UK leaving at year-end the post-Brexit transition membership arrangement of the EU's single market has elevated the pound as a favored major-currency short recommendation

                      [USD, CHF]
                      EUR-CHF was held to narrow ranges in the low 1.05s through the week. The SNB has successfully been putting a cap on the franc, which has seen EUR-CHF in recent weeks skirt along just above the five-year low that was first seen on March 9th at 1.0505 without breaching it. Weekly sight deposit data out of Switzerland has pointed to the extent of SNB franc selling over the pandemic crisis period, which was most acute in March before basing out as global governments and central banks acted with interventions and stimulus packages.

                      [USD, CAD]
                      USD-CAD edged back from its early 1.4110 high, basing at 1.4055 before heading back to 1.4114. Two-month oil price highs over $29/bbl limited USD-CAD gains, while risk-off conditions put a floor under the pairing. Ahead of Monday's Victoria Day holiday in Canada, USD-CAD activity is liable to dry up early. Support remains at Wednesday's low of 1.4007, with resistance at Thursday's high of 1.4114.

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