December 2, 2020
- Brexit jitters knock GBPUSD off its top.
- German and Eurozone data cap EURUSD gains
- US dollar free-fall, pauses
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: Traders are chowing down on the so-called risk assets. USDCAD made a new 2020 low, NZDUSD a new high, and AUDUSD equaled its 2020 peak. EURUSD is at a 32-month peak, which is helping to underpin the commodity bloc currencies.
Asia equity indexes closed nearly unchanged, while European bourses are a mixed bag. The UK FTSE100 is up around 0.24% while Germany’s DAX is down 0.30%. US equity futures are slightly lower as of 6:30 am.
The UK government approved Pfizer’s COVID-19 vaccine for emergency treatment, which helped support positive risk sentiment.
EURUSD traded narrowly in Asia, touched 1.2087 in early European trading, then dropped to 1.2047 in early NY trading. German and Eurozone data competed with Brexit news for attention.
Brexit won. German Retail Sales were better than expected, rising 2.6% m/m in October, and Eurozone unemployment dipped to 8.4%. However, it was a lack of progress on Brexit that is limiting upside, as today was supposed to be the deadline to achieve a deal before December 31. The longer-term EURUSD technicals are bullish. The steepness of the latest rally and resistance in the 1.2080-90 area, suggest a correction is likely before the upside resumes.
GBPUSD hit 1.3440 early in the European session, then plunged to 1.3340, completely erasing yesterday’s NY morning gains. The Brexit headlines are gloomy. EU negotiators are unclear about achieving agreements on the three main issues. Other headlines suggest EU leaders would agree to an extension beyond December 31.
USDJPY climbed from 104.24 in Asia to 104.73 in early NY trading.
Prices were boosted by the surge in 10-year US Treasury yields which rose from 0.852% to 0.924%. BoJ Deputy Governor Masayoshi Amamiya reminded markets that the central bank “would not hesitate to take additional easing measures if warranted.”
AUDUSD was the blue ribbon winner in the FX Sweepstakes overnight. It was the only G-10 major currency to gain, even if it was a mere 0.04%. Australia Q3 GDP surprised to the upside, rising 3.3, and means that technically, Australia is no longer in a recession. However, the gains did not last an AUDUSD dropped from a peak of 0.7392 to 0.7365 in NY trading.
Oil prices shrugged off news that US crude inventories rose 4.1 million barrels in the week ending November 27. WTI closed at $44.35 and traded around that level for most of the session.
USDCAD price action continued to mirror that of the other commodity currencies. Yesterday, Canada’s GDP report was weaker than expected. Economists and the Government of Canada expect GDP growth to rebound to 4.8% in 2021.
US ADP Employment rose 307,000, well-below the forecast for an increase of 410,000.
USDCAD Technicals: The intraday USDCAD technicals flipped to bullish with the break above 1.2940 this morning, suggesting further gains to 1.3005. However, the rally is merely a correction, as long as prices are below 1.3230 which is the March downtrend line. For today, USDCAD support is at 1.2930 and 1.2890. Resistance is at 1.2960 and 1.3005. Today’s Range 1.2930-1.3005.
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank