November 25, 2020
- US data dump ahead of Thanksgiving flight
- Financial market vaccine rally continues
- US dollar consolidating losses
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: Economic junkies had a cornucopiaof data to chose from today. Q3 GDP didn’t surprise anyone. It rose 33.1% y/y, identical to the previous results. October Durable Goods Orders rose a better than expected 1.3% but still a tade below Septembers 2.1% increase. Initial Jobless claims disappointed, rising 778,000 compared to last weeks 748,000 increase. The US dollar inched lower on the news.
In the finale of Lord of the Rings, the “one ring to rule them all” falls into the fires of Mordor, Sauron is destroyed, and shockwaves cross the land, washing away the cloud of doom. In the 2020 version, the ring is the COVID-19 vaccine, and Sauron is Donald Trump.
Yesterday, the Dow Jones Industrial Average closed above 30,000 for the first time, underpinning Asia equity markets. European equity traders are a little more cautious. The major indexes are modestly lower at the time of writing, mostly due to profit-taking.
The US reported 171,621 new coronavirus cases yesterday, but the only people who seem to care are medical professionals and the victims. The others pegged their hopes on vaccines, expecting some availability in the next few weeks if you are in the US. Canadian’s will be lucky to see a large scale roll-out of a vaccine by the end of 2021.
EURUSD probed resistance in the 1.1915-250 zone then retreated to 1.1882 in NY trading. The ECB warned the government about abruptly cutting pandemic aid as it would derail the recovery. EU President Ursula Von der Leyden is sending mixed signals bout Brexit. On the one hand, she is confident of a deal, and on the other, she warns that the EU will not accept any deal that undermines the single market. EURUSD’s failure to sustain gains above 1.1920, ongoing coronavirus restrictions, and Brexit, suggest EURUSD will consolidate in a 1.1820-1.1920 range.
GBPUSD is softer thanks to a lack of fresh Brexit headlines and ahead of a spending review by Chancellor Rishi Sunak. Mr Sunak warned that the impact of COVID-19 on the economy would be a “sobering read. GBPUSD traded in a 1.3306-1.3383 range.
USDJPY ignored the governments month economic assessment, mainly because it was nearly the same as the October review. USDJPY traded narrowly in a 104.35-60 range.
AUDUSD was sold after weaker than expected Q3 Construction Work Done data gave traders an excuse to book profits after the recent gains. NZDUSD tracked AUDUSD lower, helped by the RBNZ Stability Review report which warned of economic risks from falling house prices.
Oil traders ignored an increase in US crude inventories for the week ending November 20, and continued to focus on hopes for rising demand from a vaccine fueled global economic rebound. WTI rose from$42.80/barrel on Tuesday to $45.65/b overnight, a 6.7% increase.
USDCAD dropped steadily yesterday and consolidated the losses in Asia, before climbing to 1.3027 in early NY trading. There are a reasonable amount of options expiring today with strikes in the 1.3025 area, which suggests prices may hover around that price until after 10 am. USDCAD is vulnerable to sizeable month-end portfolio rebalancing selling pressures as the S&P 500 is up 11.18% month to date. Firm oil prices are also weighing on the currency pair. The US Thanksgiving long weekend (for many) may encourage some pre-dealing.
Michigan Consumer Sentiment is on tap. Remember, FX liquidity will deteriorate rapidly in the afternoon as US traders get an early start to Thanksgiving.
USDCAD Technicals: The intraday USDCAD technicals are bearish below 1.3030, looking for a break below 1.2990 to extend losses to 1.2950. The daily chart warns that a decisive breech of 1.2950 opens the door to a test of support at 1.2735. For today, USDCAD support is at 1.2990 and 1.2950. Resistance is at 1.3030 and 1.3060 Today’s Range 1.2950-1.3030
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank