October 2, 2020
- Risk-aversion sweeps markets on Trump COVID-19 diagnosis
- Forecaster’s looking for robust NFP results
- US dollar opens with gains except against JPY and GBP
FX Ranges at a Glance -For September 2020
Source: IFXA Ltd/RP
FX Recap and Outlook: There was a mad scramble for “risk-off trades” after President Trump tweeted “Tonight, @FLOTUS and I tested positive for COVID-19. We will begin our quarantine and recovery process immediately. We will get through this TOGETHER!”
Global equity markets sank, S&P Futures dropped 1.8%, oil prices plunged, gold firmed, and JPY rose 0.30%, following the news. Those moves are likely to reverse themselves, as a positive COVID-19 test does not mean incapacitated.
However, quarantine measures may mess up the plans for the next two presidential debates.
It is Nonfarm payrolls day in America. NFP is expected to show a gain of 850,000 jobs while the unemployment rate drops to 8.2% from 8.4%
EURUSD dropped from 1.1747 to 1.1697 on the Trump news, then bounced to 1.1737. Weak September inflation data (actual -0.3% vs -0.2% y/y) weighed on prices as it may encourage a dovish response from the ECB.
GBPUSD has been up and down like a pogo stick, bouncing in a 1.2836-1.2953 range. A flurry of contradicting Brexit headlines are whip-sawing prices. The UK’s banking industry is under threat from Brexit. The EU’s Financial Services Designate Mairead McGuiness warned “Under all circumstances, deal or no deal, trading in financial services will be different and less fluid as of the first of January next year. We need to avoid being overly dependent on a third country for key financial services.”
Prime Minister Boris Johnson and EU Commission President Ursula von der Leyen are reportedly holding trade talks on Saturday, with other trade talks continuing until the EU Summit October 15.
USDJPY dropped to 104.95 from 105.66 after the Trump COVID-19 news sparked a wave of safe-haven demand for yen.
WTI oil dropped 8.5% since yesterday’s European peak. The Trump coronavirus news exacerbated the slide, which started after a report that OPEC oil production rose to 18.2 million bpd in September, compared to 17.53 million bpd in August. In addition, the resurgence of coronavirus outbreaks in many regions suggested weaker global demand for crude.
USDCAD tracked antipodean moves, but weak oil prices acted as a drag on losses. There isn’t any domestic data due today, leaving currency direction at the mercy of broad US dollar sentiment.
USDCAD Technicals: The intraday technicals are mildly bullish above 1.3280, looking for a break above 1.3340 to extend gains to 1.3380, and then 1.3420. Longer term, the downtrend from March is intact below 1.3420, looking for a move below 1.3240 to shift the focus to support at 1.2940. For today, USDCAD support is at 1.3280 and 1.3250. Resistance is at 1.3340 and 1.3380 Today’s Range 1.3280-1.3380.
Chart: USDCAD monthly
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank