January 6, 2021
- Democrats win one Senate seat-the other is virtually tied
- ADP employment disappoints in a big way
- US dollar slide accelerates, then reverses in NY trading
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: It is not looking good for US Republican politicians. They lost the White House in November, despite what Donald Trump says, and they are on the cusp of losing control of the Senate as well. The Georgia run-off vote resulted in the Democrats close to winning one seat and claiming the other.
Market analysts suggest that a Democrat-controlled Senate means higher corporate taxes, a shift to a clean energy focus, and a rebuilding of Obamacare. They also expect further rounds of fiscal stimulus.
Asia equity markets closed with a mixed tone. Japan’s Nikkei fell 0.38% in part due to soaring new coronavirus cases in the country, while Chinese indexes were higher. A soaring UK FTSE 100 (+2.20%) helped keep the other European bourses in the green.
The ADP employment report showed private sector employment falling 123,000 from November to December. Analysts expected an increase of 304,000. The US dollar inched higher on the news
US equity futures are mixed. Oil rallied while gold prices dipped. US 10-year Treasury yields, touched 1.036% overnight but dipped to 1.00% after the ADP employment report
EURUSD broke above key resistance at 1.2330 overnight but the rally stalled at 1.2349 and prices have slid to 1.2327, after the ADP data. Traders are ignoring weak German and Eurozone Services PMI data, mainly because it is all COVID-19 related.
GBPUSD is trading near the bottom of its 1.3594-1.3670 range. UK Services PMI was a weaker than expected 49.4 (forecast 49.9) which was entirely blamed on the coronavirus outbreak’s impact.
USDJPY traded in a 102.60-102.88 range overnight but spiked to 103.11 in NY trading, as the ADP data encourage a bit of profit-taking. Broad US dollar weakness on the back of the Georgia Senate run-off vote and bearish technicals continue to weight on the currency .Japan reported 5,307 new COVID-19 cases and traders are waiting for the Prime Minister’s decision on declaring a State of Emergency, due Thursday.
AUDUSD rallied, supported by steady China Services PMI data, and “risk-on” sentiment. Prices continued to be underpinned by the surge in iron-ore prices this week. NZDUSD tracked AUDUSD moves.
WTI oil prices jumped from $48.01/b yesterday morning to close at $49.81 after Saudi Arabia announced it would cut production by 1 million barrels per day, starting February 1. WTI added to those gains overnight, rising from $49.72 to $50.56/barrel.
USDCAD plunged alongside broad US dollar weakness and dropped from 1.2669 to 1.2632 in early NY trading today. That move completely reversed, and prices rebounded to 1.2708. USDCAD direction continues to be determined by broad US dollar moves and not domestic influences.
Traders are looking ahead to the final Georgia vote tally, and the minutes of the December 16 FOMC meeting, which are due today.
USDCAD Technicals: The trend is your friend and the USDCAD trend is still down while prices are below 1.2805 and 1.2730 looking to extend losses to 1.2500. For today, USDCAD support is at 1.2630 and 1.2550. Resistance is at 1.2690 and 1.2730. Today’s Range 1.2610-1.2710
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank