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October 1, 2020

USDCAD open (6:00 am ET) 1.3287-91, Overnight Range 1.3282-1.3321

  • Risk sentiment improves, Jobless claims drop
  • GBPUSD whip-sawed on Brexit
  • US dollar finished September with gains, but opened October with losses

FX Ranges at a Glance -For September 2020

Source: IFXA Ltd/RP

FX Recap and Outlook:  US Jobless Claims fell to 837,000 in the week ending September 26, down from 873,000 the week before.  The result was better than expected and shows that the US recovery is on track.

September was a good month for US dollar bulls, fueled by a 3.9% gains against the British pound.  The Japanese yen was the only currency to record a gain, and it was small.  Those gains were eroded yesterday and continued overnight.   Better than expected US data, and fiscal stimulus hopes rose, turned risk sentiment positive.

Asia equity markets were quiet, due to the start of Golden Week holiday’s in China.  Taiwan, Hong Kong, and South Korea markets were also closed. The Tokyo Stock exchange suffered a technical glitch, and it was off-line all day.

GBPUSD sank, then soared in a whippy European-early NY session.  Prices dropped from 1.2947 to 1.2821, after news that the European Union began legal proceeding against the UK for changing the Brexit Agreement.  The EU accused Britain of failing to act in “good faith.”  Reuters reported that  EU/UK trade talks stalled, exacerbating the situation. The sell-off quickly reversed after the Financial Times contradicted the Reuters report, saying the two sides reached a compromise on state aid.  GBPUSD soared to 1.2978.

EURUSD chopped about in a 1.1718-1.1769 range.  Gains were slowed on Brexit concerns, mixed equity market performance, and concerns about a delay in the Covid-19 Relief fund.   However, prices were supported by improved risk sentiment stemming from US stimulus chatter, and steady Euro area Manufacturing PMI reports.  EURUSD is in a minor uptrend above 1.1700 looking for a break above resistance in the 1.1760-90 area to extend gains.   That may be difficult ahead of the 10 am NY option cut, when 2.6 billion of option strikes expire.

USDJPY traded firmer, albeit in a narrow range.  Prices were supported by improved risk sentiment, but traders were cautious ahead of Friday’s US employment report.

AUDUSD climbed to 0.7196 from 0.7156, underpinned by a poll suggesting the RBA would leave rates unchanged at next week’s meeting.  Improved risk sentiment also supported prices.  NZDUSD price action mirrored AUDUSD.

USDCAD managed to turn a frown upside down.  USDCAD broke above resistance at 1.3340 last Friday, and it spent most of last week trying to crack above the 1.3420 level.  It failed miserably, and prices dropped from 1.3417 yesterday to 1.3282 overnight.  The end of month end portfolio flows, and US stimulus chatter leading to positive risk sentiment, drove prices lower and turned the technicals bearish.

Today’s ISM Manufacturing PMI is expected to be 56.3 compared to 56 in August.  Healthy US data will stoke risk rally sentiment.

USDCAD Technicals: The technicals are bearish while prices are below 1.3350, looking for a break of uptrend line support at 1.3240 to extend losses to 1.3120. For today, USDCAD support is at 1.3240 and 1.3210.  Resistance is at 1.3320  and 1.3350. Today’s Range 1.3240-1.3320

Chart: USDCAD 4 hour

Source:  Saxo Bank

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

Source:  Saxo Bank