XE Market Analysis: Asia - Jul 09, 2019

The Dollar was relatively steady through the N.Y. session on Tuesday, with traders mostly on Powell patrol ahead of the Fed chair's congressional testimony on Wednesday. There was nothing in the way of market moving data, and focus remained on position adjustment activity. The DXY ranged between 97.59 and 97.46 through the day. EUR-USD managed a 1.1196 yo 1.1211 trading band, while USD-JPY steadied between 108.73 and 108.85. USD-CAD managed a 1.3140 high, up from near 1.3115 at the open, while Cable bottomed at near lows of the year at 1.2440.

[EUR, USD]
EUR-USD has recovered modestly from the three-week lows of 1.1194 seen ahead of the open, edging back toward 1.1210 in early N.Y. dealings. The pricing out of 50 bps of Fed easing at the end of the month, following last week's strong U.S. jobs report, along with expectations for additional ECB easing, has seen the pairing print lower daily lows since Thursday, with the June 18 base of 1.1182 now within reach. Euro short covering ahead of Powell's Wednesday testimony could now be in the cards.

[USD, JPY]
USD-JPY was stopped in its tracks at six-week highs of 108.96 in London morning trade, the level coinciding with the 50-day moving average. Profit taking ensued, which took the pairing to 108.76 lows in early N.Y. In addition to the noted technical resistance, Japanese exporter offers are reportedly parked from the 109.00 level, which should help cap gains going forward.

[GBP, USD]
Cable fell to 1.2440 lows, levels last seen at the beginning of January. EUR-GBP rallied above 0.9000 for the first time since early January as well. A 1.6% y/y contraction in the BRC retail sales figure for June today, which thwarted the consensus forecast for a 0.8% rise, is the latest in a series of underwhelming data out of the UK, providing fresh fuel for the pronounced declining motion the UK currency has been seeing since early May. The UK releases May industrial production on Wednesday, which has us expecting some rebound-from-weakness, with output seen lifting 1.5% m/m after April sharp 2.7% contraction.

[USD, CHF]
EUR-CHF has put in a couple of weeks of steady, range-bound trading after dropping sharply in mid June as markets adjusted to increased prospects for the ECB to return to the dovish policy tap. The cross printed a two-year low at 1.1057 before recouping to levels around 1.1100. The advance of the Franc against the Euro will be displeasing to the SNB (the EUR-CHF cross being a good proxy on the Swiss currency's trade weighted value). The SNB restated at its quarterly policy review last month that downside risks to the economy have increased, and that the overall policy setting "remains as expansionary as before." With the ECB increasingly under pressure to ease policy again, the SNB remains eager to counter Franc appreciation, especially against the Euro. Assuming the ECB remains on the path of further monetary policy easing, we would expect EUR-CHF retain a declining bias.

[USD, CAD]
USD-CAD rallied to 1.3134 in London morning trade, up from overnight lows of 1.3088. The move came on general USD strength, which has been maintained since last Friday's U.S. jobs report, and on the lack of oil price follow through gains. Fed chair Powell's testimony on Wednesday is in focus now, where traders will look for hints on the policy path. USD-CAD later topped at 1.3140, a seven-session high.