Picture: Wikimedia commons

November 3, 2020

USDCAD open (6:00 am ET) 1.3164-68, Overnight Range 1.3139-1.3232

  • Polls predict a win for “Sleepy Joe”-authorities fear “banana-republic” style chaos
  • 86,154 positive coronavirus tests in USA on Monday
  • Stocks rally, and US dollar retreats overnight

FX Ranges at a Glance

Source: IFXA Ltd/RP

FX Recap and Outlook Finally!  It’s election day in the USA.  And American’s are ill.  The 83,154 COVID -19 cases recorded yesterday, is a drop in the bucket compared to American’s who are sick of the election.

This election has all the earmarks of a South American, banana-republic vote.  The US media is rife with reports of  armed right-wing groups “protecting” voting stations, store-fronts are being boarded up in anticipation of riots, and gun sales have spiked.   America is becoming what it used to mock.

“How do you spell Banana?”

Global equity markets followed Wall Streets lead and rallied.  Asia closed with substantial gains, and European bourses have put in an impressive performance.  S&P futures are pointing a replay of yesterday’s performance.  WTI oil prices climbed 3.3%, and US 10 year Treasury yields have risen 3.% (as of 6:40 am ET).  However, these gains may be suspect.  They have occurred in relatively poor liquidity conditions as many traders are sidelined until after the election.

EURUSD rallied from 1.1639 to 1.1716 in NY trading, in part due to hopes that Biden wins.  That’s because the next round of ECB and EU stimulus spending will pale in the face of Democrat spending plans.  The short term technicals suggest the rally is just a correction, while prices are below 1.1750.

GBPUSD climbed to 1.3004 from 1.2916 on the back of the broad US dollar weakness, and hopes for news of a break-though in the EU/UK trade talks.  However, new coronavirus lockdown measures throughout the country and expectations for a very dovish Bank of England policy meeting on Thursday are capping gains.

USDJPY slept through the US dollar retreat, snoring inside a 104.49-104.79 range.  Risk aversion sentiment weighs on the currency pair, while higher US Treasury yields underpin prices.

AUDUSD  soared after an initial wobble, post RBA meeting.  The central bank cut the Overnight Cash Rate (OCR) and reduced the target for the 3-year Australia Government bond to 0.10%  from 0.15% while announcing a $100 billion QE program.  The results were expected.  AUDUSD rallied in a text-book example of sell the rumour, buy the fact, climbing from 0.7029 to 0.7131.  Traders ignored news that China planned to ban Australia Wheat imports.

USDCAD dropped like a duck in hunting season.  Prices plunged from 1.3232 to 1.3139 on the back of broad US dollar weakness and the surge in oil prices.  WTI oil jumped 13.5% since yesterday, rising from $33.70/barrel to $38.25 today.  The surge in oil prices is due to a Bloomberg article suggesting Opec and friends may delay the easing of production cuts.

FX markets will take direction from Wall Street price action.  However, caution ahead of the lection suggests liquidity will be poor.   The US economic reports will not be a factor.

USDCAD Technicals:  The intraday USDCAD technicals  bearish following the break below 1.3270 yesterday and the move below 1.3210 overnight.  That sets the stage for a break of support at 1.3130 and a drop to the 1.3050-80 zone.   For today, it’s a crap-shoot. But the downtrend line from May is intact below 1.3390.

Chart: USDCAD 4 hour

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank