XE Market Analysis: Asia - Dec 30, 2020

The Dollar was lower in N.Y. on Wednesday, seeing the DXY hit new 33-month lows of 89.56 early in the session, down from 90.02 after the close on Tuesday. The greenback later recovered modestly in light afternoon trade. Prospects for further fiscal stimulus weighed on the USD, while softer incoming data didn't help either. The advance goods trade deficit for November ran up to its highest ever, while pending home sales fell short of expectations as well. The Chicago PMI was better than expected, which offset to a degree. The final trading day of the year on Thursday will feature weekly jobless claims.

[EUR, USD]
EUR-USD ran up to 33-month highs of 1.2310 in early N.Y. trade, up from overnight lows of 1.2252. General USD weakness pushed the pairing higher. Buy-stops were reported just above 1.2300, though follow through was limited, as noted profit taking quickly took the pairing back under 1.2275. Further USD losses are widely anticipated to start the new year, as additional fiscal stimulus should keep a cap on the Dollar. Going into the last trading day of the year however, we look for recent ranges to hold up.

[USD, JPY]
USD-JPY dipped briefly under the 103.00 mark, bottoming at a two-week low of 102.96, before recovering to 103.36 into the London close. Decent buying interest was noted under the figure, though with the Dollar generally under pressure, further gains will likely be limited. The DXY printed fresh 33-month lows of 89.56 earlier in the session. USD-JPY resistance is at the 20-day moving average of 103.75, with support at the December 17 low of 102.87.

[GBP, USD]
Cable rallied in N.Y. on Wednesday, to just shy of the December 24 top, which came following the Brexit trade agreement. The pairing toped at 1.3619 in late morning trade. The post-Brexit deal "sell the news" driven sell-off seen earlier in the week appears to have run its course, though traders will keep their powder dry to an extent early in the New Year, waiting to see how messy (or not) the logistics of the new trade background work out.

[USD, CHF]
The SNB maintained policy settings in December and reaffirmed once again that it will use direct intervention on currency markets to keep a lid on the "highly valued" currency, despite the fact that the U.S. now official labels Switzerland as currency manipulator. There was no real surprise in the statement, with the central bank highlighting that Covid-19 is "continuing to have a strong adverse effect on the economy". The bank expects consumer prices to fall sharply this year and to stay around zero over the next two years, also thanks to a strong CHF. EUR-CHF traded to two-week highs of 1.0850 following the SNB announcement, and has remained above 1.0800 since.

[USD, CAD]
USD-CAD fell to an eight-session low of 1.2750 in late morning, down from highs of 1.2800. A rebound in WTI crude prices from earlier lows has helped the CAD, as have general USD weakness, and risk-on conditions. The pairing is back under its 20-day moving average, currently at 1.2807, which now provides resistance. The 32-month low of 1.2688 seen on December 15 is the next support level. Further USD weakness is expected in the coming weeks, as additional fiscal stimulus kicks in, and the Fed remains in lower for longer mode for the foreseeable future.