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November 5, 2020
- Trump or Biden-still undecided
- Bank of England boosts stimulus more than even they predicted
- Weekly Jobless Claims data close to forecasts
- US dollar sinks on risk rally revival-FOMC meeting ahead
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook The Presidential election is a horse race. Neither side has claimed victory, but both Trump and Biden said they think they are winning. It may come down to the courts to decide who becomes the Commander in Chief, and who heads to the glue factory.
Global equity markets rallied following Wall Streets positive close. Hong Kong’s Hang Seng Index, led Asia markets higher, closing with a 3.25% gain.
European bourses are climbing despite bearish comments from EU officials. S&P Futures are deep into the green, suggesting another “up” day on Wall Street.
Equity traders appear to be turning a blind eye to Coronavirus news. The US reported 104,004 new COVID-19 cases, and it barely caused a ripple in financial markets. Perhaps traders believe the numbers merely reflect the number of the people who are sick of hearing about the numbers.
The US dollar is in full-retreat mode, as positive risk sentiment accelerates, in anticipation that Joe Biden wins the election-and the numerous court challenges that are sure to follow.
GBPUSD dipped in Asia, then soared in Europe, rising from a low of 1.2935 to 1.3109 in NY trading.
The Bank of England surprised traders, and probably themselves when they increased the quantitative easing program by £150 billion, after strongly hinting at a £100 billion increase earlier. The more aggressive policy response underpinned prices, despite the BoE saying the UK economy will shrink 11% in 2020, and not return to pre-COVID-19 levels until 2023. They also forecast a jump in the unemployment rate to 7.75%.
EURUSD enjoyed a rocket-powered rally, rising from 1.1712 in Asia to 1.1859 in NY trading. Prices ignored weak German Factory orders data for September, and disappointing Eurozone Retail Sales (Actual -2.0% m/m vs forecast -1.0% m/m) EURUSD technicals turned bullish with the break above 1.1770, and are looking for a break above 1.1880 to extend gains to 1.2010.
USDJPY sits just above support at 104.00 with prices weighed down by the steep plunge in US 10-year Treasury yields. The dropped from 0.942% on Tuesday to 0.738% in NY.
AUDUSD and NZDUSD surged due to the improved risk tone. Traders appear to have forgotten last weeks concerns about negative RBA, and RBNZ interest rate policies, content to track broad US dollar moves.
WTI oil prices climbed 16% since November 1. The gains were fueled by falling US crude inventories, broad US dollar weakness, and hopes for improved global demand.
USDCAD dropped in concert with the broad US dollar weakness. However, Canadian dollar gains sharply lagged those of its antipodean cousins, until NY opened. Since then, USDCAD dropped from 1.3120 to 1.3055, nearly equaling its overnight range.
It is FOMC day. It will be a snooze-fest as the Committee is widely expected to leave interest rates and policy unchanged. Markets only care about the US election, suggesting FX volatility will stay elevated.
US weekly jobless claims data were 751,000, a tad worse than predicted and close to unchanged from last week.
USDCAD Technicals: The intraday technicals are bearish following the break of support in the 1.3090 area, with prices testing additional support in the 1.3050-60 zone. A decisive close below 1.3040 today, suggests further losses to 1.2950. A break above 1.3150 would negate the pressure. For today, USDCAD support is at 1.3050 and 1.3010. Resistance is at 1.311, and 1.3195. Today’s Range 1.3050-1.3120
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank