Market Analysis: Asia – 20th Nov 2015


The dollar was steady to higher in N.Y. trade on Friday, posting gains against the euro following dovish tones from ECB chief Draghi during the London morning session. EUR-USD topped out at 1.0707 early in the session before trading to 1.0640 lows. USD-JPY found support into the 122.70 region, though was unable to test the 123.00 mark in a sustained manner. USD-CAD moved higher, despite firmer oil prices, as the Liberal government’s first budget painted a not so rosy outlook on the Canadian economy. Cable struggled to reclaim the 1.53 mark in London trade, and largely followed the euro lower through the session, basing at 1.5188.

EUR-USD traded through Thursday’s 1.0655 base to touch intra day low of 1.0640. The euro took a decidedly weaker tone following dovish talk from ECB chief Draghi during the European morning session. The combination of an ECB deposit rate cut, and a Fed rate hike should become strong reasons to sell euros, and we suspect as the policy meetings approach, downside potential for EUR-USD remains. Next support comes in at Wednesday’s 1.0618, seven-month low.

USD-JPY had a very quiet N.Y. session, ranging between 122.73 and 122.90. Following the BoJ’s inaction on the policy front, and a lack of dovishness from governor Kuroda, the pairing’s upside may be a tough road near term. This said, with the market gearing up for a Fed rate hike, USD-JPY losses could be minimal as well. The pairing may be setting up for a week or two of consolidation.

Cable fought its way to 1.5310 highs into the N.Y. open on Friday, though it was one-way lower from there, as the dollar perked up broadly. Higher U.K. borrowing levels in October did the pound no favors either. Cable dropped from the start of N.Y. trade into the London close, taking it to 1.5187 lows. EUR-GBP meanwhile, moved up from 0.6985 to 0.7019 highs.

EUR-CHF has been knocked back to the mid 1.08s after capping out yesterday at 1.0899. SNB’s Jordan repeated today that the franc is overvalued. The failure of the cross this week to sustain losses below the 100-day moving average, which is presently sitting at 1.0790, suggests a more bullish sentiment. The ECB’s policy path still suggests a longer-term downward bias, however, and the SNB will remain alert to this given the chronic overvaluation of the franc.

USD-CAD initially rallied following the mix of Canadian data, where the soft retail sales were the initial driver. Slightly warmer than expected CPI data however, offset, resulting in the slip lower. From 1.3320, USD-CAD popped to intra day highs of 1.3339 before falling back to 1.3283 intra day lows, before quickly recovering the 1.33 handle, as the market again eyed oil prices, which softened from overnight highs. Later, USD-CAD was not too impressed with the Liberal government’s initial budget, which slashed the growth outlook, and extended deficits out to 2019. Fresh intra day highs of 1.3348 were in the aftermath of the budget release. As oil climbed to session highs in afternoon dealings, USD-CAD fell back under 1.3330.


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