November 2, 2020
- Coronavirus clouds looms darkly over markets, PMI data ignored
- US election countdown overshadows markets
- Mild unwind of some safe-haven trades
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook There is a dark cloud over FX and global markets. It stems from news that the UK joined the Eurozone lockdown party, after Prime Minister Boris Johnson announced the closing of stores, pubs, restaurants, and other measures, until December 2. However, of bigger concern to traders is the upcoming US election, and when the results will be made available. I am positive that both Trump and Biden will declare victory on Tuesday night.
Asia equity indexes started the new month by closing with gains, and European bourses are trading higher, led by a 2.0% gain in the German DAX. US futures are higher, suggesting a positive open on Wall Street.
Traders ignored better than expected China October Caixin PMI data (actual 53.6 vs September 53)
Goldman Sachs downgraded UK Q4 GDP growth to -2.4% from +3.6%, while reducing Eurozone Q4 GDP to -2.3% from +2.2%.
EURUSD stagnated overnight. The single currency traded sideways in a 1.1623-1.1654 range. COVID-19 concerns and the dovish ECB outlook are weighing on prices. Also, stale long EURUSD positions have trimmed. The intraday EURUSD technicals are bearish below 1.1710, looking for a break of 1.1620-40 area to extend losses lower. Eurozone October PMI rose 54.8 compared to 54.4 previously.
GBPUSD traded down in Asia, falling from 1.2951 to 1.2856, on the back of the new UK lockdown, which starts Thursday.Profit-taking, and reports that the EU/UK are reaching a compromise on fishing rights, took prices back to 1.2925 in NY. Gains are capped by expectations of a new round of monetary stimulus from the bank of England on Thursday.
USDJPY dropped at Asia open on risk aversion sentiment, but those losses were recouped and prices are trading at 104.72, higher than Friday’s close of 104.67.
AUDUSD sank in early Asia trading falling from 0.7030 to 0.6992, on dovish expectations for Tuesday’s RBA monetary policy meeting. The central bank is expected to cut the OCR rate to 0.10% from 0.25% and increase its quantitative easing program. Prices bounced to 0.7042 in NY, in part because, if the ECB and RBNZ are easing as well, nothing changes.
WTI oil prices plunged to $33.67 from $35.73 at Asia open on fears that the new lockdown measures in the UK and Europe, plus rising COVID-19 cases in the US would lower global crude demand. Rising global equities and a better tone to risk sentiment drove WTI to 34.80 in NY.
USDCAD soared on the back of the plunge in crude prices, rising from 1.3319 to 1.3369 in Asia. The rally reversed itself on the back of broad US dollar weakness, and USDCAD dropped to 1.3268 in NY trading.
US ISM Manufacturing data is expected to rise to 55.8 from 55.4, but the focus will be on the US election.
USDCAD Technicals: The intraday USDCAD technicals are bullish above 1.3270, looking for a break above resistance in the 1.3380 area to test 1.3420. A break below 1.3260, targets 1.3220 Today’s Range 1.3260-1.3340
Chart: USDCAD daily
Source: Saxo Bank
FX open (7:20 am EDT) High, Low, and previous close
Source: Saxo Bank