XE Market Analysis: Asia - Sep 14, 2020

The Dollar weakened some in morning N.Y.. trade on Monday, seeing the DXY dip to 92.88 from pre-opening levels of 93.19. There was no data to drive the FX market, though it appeared risk-on conditions for a time at least prompted some safe-haven USD selling. Wall Street rallied sharply, as vaccine hopes and new tech deals supported. Pfizer CEO said there is a "good chance" the company will know if its vaccine works by the end of October. NVIDIA said it would buy Arm Holding from SoftBank for $40 bln, while Oracle looks set to take over TikTok. The Dollar later perked up some om light short covering, which took the DXY up to 93.08 highs. EUR-USD topped at 1.1888, up from opening lows of 1.1865, later easing to 1.1860. USD-JPY fell from just over 106.00 to 105.55 lows before steadying over 105.65. USD-CAD was range bound between 1.3168 and 1.3186, while GBP-USD recovered toward 1.2920 from near 1.2850 early, later easing to 1.2860. Tuesday's U.S. calendar picks up with August industrial production and capacity utilization, August trade prices, and the September Empire State index.

[EUR, USD]
EUR-USD topped at three-session highs of 1.1888, up from opening lows of 1.1864, and an overnight base of 1.1832. Better than expected EU July industrial production helped the Euro's tone, though broad USD selling has helped the move higher as well. Euro gains came despite Lagarde saying over the weekend that the euro matters and that its recent appreciation has counterbalanced part of the easing measures implemented during the pandemic. EUR-USD sellers are said to be lined up from the 1.1900 level, though a break above last Thursday's 1.1917 high is expected to bring in a round of buy-stops. Indeed, mild profit taking set in after the London close, taking the Euro to 1.1860.

[USD, JPY]
USD-JPY printed two-week lows of 105.55, down from opening highs of 106.03. Broad Dollar weakness was the driver through the morning, as risk-on conditions have resulted in the unwinding of safe-haven USD longs. The DXY dropped to 92.88 lows after topping at 93.33 during the Asian session. The pair had largely been stuck between its 20-day moving average at 106.03 and its 50-day moving average at 106.29 since Thursday. USD-JPY has been in a consolidation stage for a couple of weeks now, and the move under 105.79, which was last week's low may mark the start of a more pronounced downturn. Next support is at 105.29, the August 31 bottom.

[GBP, USD]
Cable printed fresh short-squeeze highs at 1.2919 in N.Y morning trade, up from Asian lows of 1.2775. EUR-GBP meanwhile, fell to 92.01, down from 92.68. The rebound in sterling only partially retraced the steep declines the currency saw last week. We are viewing the pound's rally a dead cat bounce. EU-UK and intra-UK tensions are running high following the UK government's gambit to unilaterally amend the EU Withdrawal Agreement. The EU has delivered an ultimatum to reverse the decision, the UK said it won't, and Brussels is delaying, according to Reuters, its decision on UK access to euro clearing operations. There has been, meanwhile, a surge in coronavirus cases in the UK, like other countries in Europe, which has led the UK government to introduce fresh nationwide social restrictions and impose a lockdown on the country's second biggest city, Birmingham. Sell the rally remains in effect for the Pound.

[USD, CHF]
EUR-CHF has ebbed back to familiar levels in the mid 1.0700s after the latest drop back from forays above the 1.0800 level. The cross has repeatedly failed to sustain gains above 1.0800 over the last couple of months. The influence of the SNB's intervening hand may have been at play during the recent upside bursts.

[USD, CAD]
USD-CAD eased from pre-opening highs of 1.3197, starting the North American session at 1.3170, before turning sideways between 1.3168 and 1.3186 through the remainder of the day. The early downdraft was largely due to a bout of general USD selling, though the Greenback later steadied, leaving USD-CAD range bound. WTI crude had little impact, as it traded in a narrow and familiar range through the session. Risk-on conditions likely kept a lid on the pairing as well. Canada July manufacturing data is the highlight for Tuesday.