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December 18, 2020
- Something’s fishy with Brexit
- Congress still working on COVID-19 Relief deal
- US dollar consolidates recent losses, opens a tad firmer vs G-10 majors
FX Ranges at a Glance:
Source: IFXA Ltd/RP
FX Recap and Outlook: The Loonie is an odd duck. AUD and NZD are up 0.51% and 0.23% respectively, since Monday’s NY open. The Canadian dollar is unchanged. It is even stranger when you consider that commodity prices, including oil are also higher on the week. The performance is suspicious, suggesting USDCAD may be supported by year-end demand flows.
USDCAD didn’t get any help from the release of October Retail Sales data, even though the 0.4% m/m gain was higher than the 0.2% forecast. Core Retail Sales was also higher than expected.
Elsewhere, COVID-19 vaccine news helped to take the sting out of rising numbers of new coronavirus cases in many areas around the world, but it wasn’t enough to prevent a profit-taking fueled, pre-weekend US dollar rally.
EU President Ursula von der Leyden and UK Prime Minister Boris Johnson are still haggling over fish-sticks, and a Brexit deal hangs in the balance. Eventually, both sides will run out of make-or-break deadlines.
EURUSD broke above resistance at 1.2170 earlier this week and extended gains to 1.2270 overnight, before retreating to 1.2252 at the NY open. Bullish EURUSD technicals and expectations for a much higher single currency level in 2021 are underpinning prices. Today’s German IFO Survey data didn’t hurt as the results for Business Climate, Current Assessment, and Expectations were higher than expected.
GBPUSD is in full Brexit-headline mode. Hopes that a deal was being announced imminently boosted GBPUSD from 1.3490 to 1.3621 yesterday. No such luck. Prices dropped to 1.3490 from 1.3585, following gloomy headlines and they have been choppy in NY trading. EU Chief Negotiator Michel Barnier said both sides stand “at a moment of truth.”
The EU maintains that if Britain wants to regain its sovereignty over fishing waters and cut access for European fisherman, the EU should be able to maintain its sovereignty by adjusting conditions for products and especially fisheries products to enter the EU.” In a nutshell, if the UK can Tuna piano, the EU can Tuna fish.
USDJPY rallied from 103.11 to 103.59, alongside broad US dollar demand ahead of the weekend. The Bank of Japan left interest rates unchanged at -010% and extended funding measures for COVID-19 relief. BOJ Governor Haruhiko Kuroda said that they were watching the currency closely, but there was no need to think the JPY rise was having a serious effect on the economy.
AUDUSD and NZDUSD dropped in a profit-taking, pre-weekend move, but both currency pairs have recovered some of those losses in early NY trading.
The US economic data is second-tier. European stock markets are slightly higher, and S&P 500 futures are close to flat.
This is the last full week of trading for 2020, and liquidity will deteriorate this afternoon and next week
USDCAD Technicals: The USDCAD technicals are bearish below 1.2770 which guards the downtrend line from April which comes into play at 1.3130. For today, USDCAD support is at 1.2720 and 1.2690 Resistance is at 1.2770 and 1.2810. Today’s Range 1.2700-1.2790
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank