XE Market Analysis: Asia - Sep 04, 2020

The Dollar rallied on Friday after the the solid U.S. August employment report, which saw non-farm payrolls increase nearly 1.4 mln, in-line with expectations. Earnings were better than forecasts, while the unemployment rate tumbled to 8.4% from 10.2%. Wall Street continued with its correction, the the tech-heavy NASDAQ again leading the charge lower. Profit taking ahead of the long U.S. weekend was behind some of the selling, although there were some concerns raised that additional fiscal stimulus may not be forthcoming due to the stronger U.S. economic data. EUR-USD fell from 1.1855 to 1.1780, later perking up over 1.1830 on short covering interest. USD-JPY topped at 106.50, up from early lows under 106.20, before settling near 106.25. USD-CAD topped at 1.3140, up from 1.3078, though pulled back to 1.3070 on position squaring later in the session. GBP-USD fell from near 1.3320 to 1.3176 before recovering to 1.3250.

[EUR, USD]
EUR-USD fell to 1.1780 lows in the aftermath of the U.S. jobs report, down from highs near 1.1855. The Dollar benefited broadly from the solid data in early trade, though later faded on profit taking into the long. U.S. weekend. The DXY printed seven-session highs of 93.24. Focus will shift to the ECB next week, with speculation that the Bank will likely strengthen its "Low for Longer" message at its Thursday meeting. Even before the negative inflation print, there had been calls for the ECB to move to a more "symmetric inflation target" as part of the ongoing strategic policy review. While there is a chance the ECB under delivers, the first part of next week should see the Euro remain under some pressure.

[USD, JPY]
USD-JPY made its way from 106.18 to 106.50 following the U.S. jobs report, though has since succumbed to some selling pressure as Wall Street gets slammed again. Sellers stepped in on the move over the 50-day moving average, which is currently at 106.44. While still range bound on the session, the pairing has eased back into the 106.30 level. Support comes at the 20-day moving average at 106.14.

[GBP, USD]
Cable fell to seven-session lows of 1.3176 in N.Y. morning trade, down from 1.3276 into the U.S. jobs report, ehich came in better than feared. Dollar strength was the driver after the data, though BoE policymakers have been changing their views with regards to UK recovery prospects. MPC member Vlieghe said this week that there is a "material risk" that it could take several years before the economy to return to full capacity. Then there is the possibility of tax hikes and the risk of a bare-bones or no-deal outcome in the Brexit endgame. Cable later bounced to 1.3230 into the London close.

[USD, CHF]
EUR-CHF rallied to the 1.0820 level on Friday, despite the risk-off backdrop. There was talk the SNB had something to do with the rally. This is a pattern that has been repeating for about six weeks now. Robust manufacturing data from most key global economies, and global stock market gains may have also helped weaken the low beta, safe haven Swiss franc. The influence of the SNB's intervening hand may have been at play during the recent upside bursts.

[USD, CAD]
USD-CAD rallied to 1.3118 highs from 1.3078 lows following the twin U.S./Canada jobs reports. Both were close to consensus expectations, though the USD appeared to have received a broader bounce. The recent drop in oil prices weighed on the CAD since then, with WTI crude falling under the $41.00 mark since the data, down from earlier highs near $41.90. Pre-long weekend position squaring later took USD-CAD to lows under 1.3070.