December 10, 2020
- ECB extends PEPP, LTRO, and more
- Johnson/von der Leyden move Brexit deadline -Dec.18 ish
- US Jobless Claims jump to 853,000
FX Ranges at a Glance:
Source: IFXA Ltd/RP
FX Recap and Outlook: TheECB delivered what they said they would, and added a little bit more. To no one’s surprise interest rates “on the marginal lending facility and the deposit facility will remain unchanged at 0.00 per cent, 0.25 per cent and -0.50 per cent, respectively.” They increased the PEPP program by €500 billion, and extended reinvestment until the end of 2023. The also tweaked the Long-term Refinancing operations (LTRO lll) and extended the duration of collateral easing measures.
EURUSD jump on the news, rising from 1.2082 to 1.2133, which coincidently is the intraday downtrend level.
US weekly jobless claims were 853,000 ,much weaker than the 725,000 expected. The results exacerbated concerns about the lack of a US stimulus deal and the surging number of Americans contracting COVID-19, which added to the US dollar selling pressure.
Deadlines from politicians are like gridlines to NFL teams-there is always another one. UK Prime Minister Boris Johnson and EU Commission President Ursula von der Leyden extended the Brexit negotiation deadline again. This time to either Sunday, or maybe December 18, or perhaps sometime in 2021. Both sides want to be seen as leaving no stone unturned in their quest for an agreement, so when the inevitable backlash occurs, they can say we did our best.
GBPUSD traders were not impressed. They knocked the currency pair from 1.3411 to 1.3293, which is a pattern repeated since December 4. Brexit overshadowed UK economic data.
Failure to get a deal done would be EURUSD negative.
The ECB pretty much pre-announced that they would ease monetary policy today. Most analysts expect an increase and extension to the PEPP program. However, the EURUSD level could be an issue. Policymakers yammered incessantly about economic growth risks from the currency when EURUSD was in the 1.1800-1.1900 area. They must be less-than-thrilled with today’s 1.2100 level.
EURUSD technicals are bullish above 1.2040-60, looking for a break above 1.2150 to extend gains to 1.2260. A break below 1.2040 opens the door to a drop to 1.1920.
USDJPY traded firmer, rising from 104.25 to 104.58. The currency pair remains locked in a 103.60-104.80 range and needs to break either side to spark enthusiasm.
AUDUSD was the best performing G-10 major currency overnight. A combination of bullish technicals and steady Inflation Expectations data for December. AUDUSD rose to 0.7493 from 0.7429. NZDUSD rallied alongside AUDUSD but not to the same extent.
USDCAD punched below 1.2765, which had contained downside moves since December 4. The move was sparked by the jump in EURUSD and the weak jobless claims data. USDCAD continues to ride the wave of consensus forecasts for a weaker US dollar in 2021.
USDCAD Technicals: The USDCAD technicals are bearish while prices are below 1.2860, which guards additional downtrend line resistance at 1.3000. Prices are directionless inside a 1.2765-1.2830 band. A with a topside break targeting 1.2870 while a downside breech puts 1.2730 in play. A break below 1.2730 will extend losses to 1.2660 then 1.2500. For today, USDCAD support is at 1.2730 and 1.2690. Resistance is at 1.2790 and 1.2830. Today’s Range 1.2730-1.2810
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank