September 21, 2020
- COVID-19 resurgence reverberates through markets
- Stock prices hammered in Europe-US Futures deep in the red
- GBPUSD sinks on coronavirus fears, Brexit,
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: The US dollar opened in Asia on the defensive due to a holiday in Japan. That changed in Europe. A wave of bad news COVID-19 stories, US budget hijinks, the ECB PEPP debate and a wave of upcoming Fed-speak fueled a wave of US dollar demand.
Rapidly rising COVID-19 cases in the UK (3,900 cases new cases Saturday) has brought the UK to a “tipping point” according to the UK Health Minister. Traders were also spooked by the elevated risk of a “no-deal” Brexit, which in conjunction with risk-averse US dollar demand, drove GBPUSD from 1.2965- to 1.2836 before prices recovered to 1.2858 in NY trading.
EURUSD climbed from the Asia low of 1.1835 to 1.1871 just before Europe opened; then it took a turn for the worse. Prices plunged to 1.1782 in NY on the back of broad USD dollar demand, and plunging Euro area equity markets. The UK FTSE 100 is down 3.17%, and the German DAX down 3.52% as of 6:3- am ET. In addition, the Financial Times reported the ECB is reviewing its Pandemic Emergency Purchasing Program. Some, like the Bundesbank, want it ended, while others want it extended. EURUSD has support at 1.1760 and 1.1730.
USDJPY dropped to 104.01 from 104.59 on safe-haven demand for JPY. The Japanese holiday may have exacerbated the fall. Prices are also weighed down by bearish technicals following the break of support at 104.80.
AUDUSD is trading near its overnight low of 0.7265, after touching 0.7323 just before Europe opened. AUDUSD dropped on the back of risk aversion trading. NZDUSD suffered the same fate, although traders were also cautious ahead of the RBNZ meeting Tuesday.
USDCAD moves mirrored those of the antipodean currencies. Prices dropped in Asia, from 1.3207 at Friday’s close to 1.3173, before rallying to 1.3238 in NY trading. WTI oil prices are bouncing between $39.50/barrel and $41.40/b, but only prices drops seem to have any impact on the currency pair, and then only modestly.
Friday’ Retail Sales report missed forecasts, which is fodder for USDCAD bulls, even though the results were largely ignored. Nevertheless, USDCAD direction is determined by broad US dollar sentiment and not domestic data.
That could change on Wednesday with the Liberal Government’s Throne Speech, especially if they propose to ramp up spending and economy-killing climate change initiatives.
US and Canadian economic data will not be a factor today as stock market activity is the focus.
USDCAD Technicals: The intraday technicals are bullish above 1.3150, but need to decisively break above 1.3260, or else it will continue to chop about in the well-defined 1.3000-1.3260 range. A break above 1.3260 targets 1.3500, while a move below 1.3150 suggests a retest of 1.3000. For today, USDCAD support is at 1.3205 and 1.3160. Resistance is at 1.3260 and 1.3290. Today’s Range 1.3170-1.3260
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank