January 4, 2021
- Control of US Senate up for grabs with Jan 5 Georgia run-off vote
- Markets ignore tightening of COVID-19 restrictions in many regions
- US dollar opens lower, continuing 2020 retreat
FX Ranges at a Glance (for 2020)
Source: IFXA Ltd/RP
FX Recap and Outlook: Hoagy Carmichael sang “Georgia on my Mind” in 1930. Donald Trump and Joe Biden are singing that tune today. The Georgia run-off vote is January 5, with control of the Senate up for grabs.
The coronavirus pandemic is still running wild, and the rising number of new cases are forcing authorities to tighten (or threaten to tighten) restrictions in many regions. German officials want to extend COVID-19 restrictions beyond January 10. Ireland moved to Level 5 restrictions for at least a month. Greece announced a one-week lockdown. The US averaged 220,155 new cases over seven days. Traders do not care. They see the coronavirus as a temporary inconvenience ahead while awaiting a vaccine.
Asia equity markets were mixed. Japanese stocks fell due to rumours that officials will announce a state of emergency in Tokyo due to COVID-19 outbreaks. Chinese equity indexes soared, led by a 3.96% gain in the Shanghai CSI 300 index. In Europe, the UK FTSE100 jumped 2.76%, while the German DAX and French CAC gained 1.30% and 1.72% respectively. US equity futures point to a positive open on Wall Street. Gold and oil prices are also higher.
EURUSD closed December 31 at 1.2217, jumped to 1.2249 in early Asia trading, then continued to climb, reaching 1.2300 just before NY opened. The single currency is underpinned by hopes for a strong, global economic recovery, in a low interest rate environment. German Manufacturing PMI data at 53.3 for December supports the recovery view. EURUSD technicals are bullish above 1.2210, looking for a test of resistance at 1.2330.
GBPUSD continues to be supported by post-Brexit relief. Prices traded in a narrow 1.3668-1.3702 range and are trading near the bottom of that band in NY. UK manufacturing PMI was 57.5 in December, compared to 57.3 in November. The short term GBPUSD technicals are bullish above 1.3590, looking for a decisive break above 1.3700 to extend gains to 1.3870.
USDJPY dropped from 103.31 to 102.72 on the back of broad US dollar weakness. The bearish technical outlook was reinforced by the break of support at 102.90, which targets 101.30.
AUDUSD and NZDUSD rode the “risk-on” rally bus. AUDUSD climbed to 0.7739 from 0.7683, while NZDUSD climbed to 0.7229 from 0.7183. China Caixin PMI data helped to underpin both currency pairs.
USDCAD tracked broad US dollar movements, as usual. Prices dropped to 1.2667 just before NY opened and then climbed to 1.2705. High COVID-19 cases, limited vaccine available domestically, and the threat of new restrictions in Ontario suggest prices will be supported in the 1.2650-60 level.
Today’s US data calendar is light. Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans speak today. Their remarks carry a bit more weight than usual as they have become FOMC voting members.
USDCAD Technicals: The intraday USDCAD technicals are bearish below 1.2730, looking for a break of 1.2650 to extend losses to 1.2550. A topside break suggests further gains to 1.2810. For today, USDCAD support is at 1.2670 and 1.2650. Resistance is at 1.2710 and 1.2740. Today’s Range 1.2660-1.2740
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank