October 30, 2020
- Canada August GDP rises 1.2%, beating forecast
- Rapidly rising COVID-19 cases in Europe, take shine of Eurozone GDP rebound
- Euro area economic data ignored after ECB suggests more stimulus in December
- Month-end rebalancing flows distort FX action
FX Ranges at a Glance for October
Source: IFXA Ltd/RP
FX Recap and Outlook Statistics Canada said “Real gross domestic product (GDP) grew 1.2% in August, following a 3.1% increase in July. This fourth consecutive monthly increase continued to offset the steepest drops on record in Canadian economic activity observed in March and April, however overall economic activity was still about 5% below February’s pre-pandemic level.” USDCAD dipped to 1.3294 from 1.3314 after the news.
US Personal income rose 0.9% in September, beating the 0.4% rise expected. The data is overshadowed by uncertainty around the US election.
FX and equity bulls will not be unhappy to turn the page on this month. The S&P 500 index is poised to close in negative territory unless it can rally 1.5% today. Month-end portfolio rebalancing flows make cause a disruption in the run-up to 11:00 am. However, fears of more lockdown restrictions due to soaring coronavirus cases, and last-minute election jitters, should ensure risk-averse trading today.
EURUSD consolidated is post ECB losses in a 1.16962-1.1694 range. The ECB policy meeting did everything but announce that a new stimulus package would be delivered in December. Today, the Governor of the Central Bank of Austria and ECB policymaker Robert Holzmann said: “What we have decided is to make preparations, to go through our portfolio and see in what area we need to recalibrate to be ready for December, but the decision will be based on December data.”
Eurozone, Q3 GDP rose 12.7% q/q, better than expected, and Unemployment was 8.3%, unchanged from the upwardly revised August data. German Q3 was better than expected at 8.2%. The data was largely ignored due to yesterday’s ECB meeting. EURUSD short term technicals are bearish while prices are below 1.1730.
GBPUSD is trading at the top of its 1.2900-1.2978 range, in part because month-end GBPUSD selling pressures have abated somewhat, and in part due to the selling of EURGBP.
Traders are also mildly bullish due to hopes of an EU/UK trade deal.
USDJPY tried to break below 104.00 yesterday but failed, and bounced to 104.78 before closing at 104.61.
On-going US election uncertainty and risk aversion sentiment from escalating coronavirus cases had USDJPY trading with a negative bias in a 104.13-104.60 range overnight.
AUDUSD and NZDUSD were steady but mildly firmer, as risk aversion sentiment eased, somewhat.
USDCAD peaked at 1.3390 yesterday and it is trading at 1.3308 in Toronto. The price action is mirroring that of EURUSD and AUIDUSD, while also tracking oil prices. WTI bounced from a low of $34.98/barrel as is now at $36.22/b corresponding to the USDCAD slide overnight.
USDCAD Technicals: Yesterday’s USDCAD rally stalled right on 23.6% Fibonacci retracement of the March-September range which is guarding a series to daily highs at 1.3425. The intraday technicals are bearish below 1.3340, looking for a break of support at 1.3280 to extend losses to 1.3205. A break above 1.3340 targets 1.3425. Today’s Range 1.3270-1.3370
Chart: USDCAD 1 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank