XE Market Analysis: Asia - Aug 11, 2020

The Dollar was modestly higher in N.Y. trade on Tuesday, taking the DXY from opening lows of 93.18 to a high of 93.53. Warmer than expected July PPI provided support to the USD, as did the resultant rise in Treasury yields. EUR-USD eased from 1.1807 highs to a low of 1.1757, ass USD-JPY topped at 106.57, up from early lows of 105.93. USD-CAD headed from 1.3267 to a high at 1.3319 before fading again. GBP-USD meanwhile, eased from 1.3132 to 1.3073 into the London close. Wednesday's U.S. calendar brings July CPI, which we expect will rise 0.3% overall, and 0.1% on an ex-food and energy basis.

[EUR, USD]
EUR-USD has been fairly steady through the N.Y. session, topping at 1.1807 early, before later dipping to 1.1757 lows. The pairing printed a six-day low at 1.1723 in Asian hours, extending the correction from the 27-month high of 1.1917 seen last Thursday. Despite uncertainty over further stimulus efforts, the fact that COVID cases appear to be on the decline in the U.S. should go some way to support the Dollar in the coming weeks. EUR-USD support is now at the August 4 low of 1.1720, with resistance at today's 1.1807 high.

[USD, JPY]
USD-JPY rallied to 13-session highs of 106.57, up from 105.93 lows seen early on. Buying interest stepped up on the move above the 20-day moving average, which currently sits at 106.12. The risk-on backdrop, including higher equities and Treasury yields saw the risk-sensitive Yen come under some pressure, though momentum has faded for now, resulting in some short term profit taking related selling. The above mentioned 106.12 level now marks support, with resistance at the July 24 high of 106.92.

[GBP, USD]
Cable headed from London lows of 1.3055 to 1.3132 into the N.Y. open, before easing to 1.3073 on general Dollar strength. Risk appetite returned to markets, which helped the pairing initially. Indeed, we see limited scope for sustained gains in the pound. The BoE last week delivered a warily-upbeat outlook, though with localized lockdowns fresh quarantine restrictions hitting holiday makers, sentiment remains shaky, while labour market data showed a sharp rise in jobless claims last month. Brexit meanwhile remains unresolved, although off the agenda for now during the summer break. Talks are scheduled to resume on the week of August 17th.

[USD, CHF]
The Swiss franc has steadied below recent highs, sticking to the upper 1.07s on Tuesday. The influence of the SNB's intervening hand seemed to have been at play. Weekly sight deposit figures out of Switzerland have been suggesting that the central bank has been continuing to sell francs regularly, as it has been since the consequences of the pandemic took a grip on markets, which had the impact of increasing demand for the Swiss currency. A rise in sight deposits (money held by commercial banks) can suggest francs turning up after being sold by the central bank. The advent of the EU's recovery fund, seen as a milestone by many analysts (a new liquid AAA fund that also reduces Eurozone breakup risks) has by many accounts caused a re-weighting of the common currency in portfolios, and which will help the SNB combat what it sees as a chronically overvalued franc.

[USD, CAD]
USD-CAD made its way to four-session lows of 1.3269 in early North American trade, coming from overnight highs of 1.3362 seen after Monday's close. The combination of risk-on conditions and higher oil prices weighed on the pairing through the London morning session. Since then, a partial reversal lower for WTI crude has seen USD-CAD reclaim the 1.3315 level. The global economic recovery from lockdowns, which were at their peak in April, has been instrumental in USD-CAD's downtrend, with the CAD rising with oil prices while the USD has waned as a safe haven currency. The Canadian Dollar should continue to remain sensitive to fluctuations in the U.S. Dollar and oil prices.