October 15, 2020
- Weekly jobless claims higher than expected
- Brexit talks on-going-another deadline looms
- Wall Street earnings reports, lack of US stimulus deal, sink equities
- US dollar climbs on negative risk sentiment.
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: Weekly US Jobless Claims jumped to 898,000 from the upwardly revised 845,00 last week. The rise was not totally unexpected due the number of lay-off notices recently.
Pessimists and worry-warts hit the jackpot overnight. Disappointing earnings from Bank of America, and Wells Fargo, combined with the failure of the US Congress to enact a new COVID-19 Relief plan, Brexit brinkmanship, new US sanctions on HK leaders, and second-wave coronavirus outbreaks, sparked a tsunami of US dollar demand, and equity market selling. Geopolitical tensions were another factor. News that a US Navy destroyer sailed through the Taiwan Strait, angered China, as did the State Department warning institutions doing business in HK, that they could face sanctions if they deal with previously sanctioned HK officials.
Wall Street closed with losses, and Asia equity indexes finished in the red, except Australia’s ASX 200. The major European bourses are down over 2.0%, led by a 2.82% drop in the German Dax (as of 6:25 am), and US equity futures are deep in negative territory.
A second-wave coronavirus outbreak is rippling through parts of Europe and the UK. Paris has a curfew, Spain is closing bars and restaurants for 15 days in the Catalonia region, and a German Minister called the latest outbreak “a very broad second-wave.”
EURUSD dropped from 1.1760 to 1.1704, weighed down by coronavirus outbreaks, weak equity markets, and broad US dollar demand. Eurozone data was second-tier and not a factor for traders. The EURUSD uptrend from June is intact while prices are above the 1.1660-70 area.
GBPUSD traded sideways in Asia, then plunged in Europe, dropping from 1.3029 to 1.2833, just as NY opened. The two-day EU Summit has started, and Brexit is the key topic. Boris Johnson’s threat to walk away from the discussions is weighing on GBPUSD, as are the latest coronavirus restrictions.
USDJPY continues to bounce between 105.00-105.50. Traders are torn between selling the currency pair on rising risk aversion, and softer Treasury yields, and buying USDJPY due to broad US dollar demand.
AUDUSD led the major G-10 currencies lower overnight. The Australian Labour report was weak, reported a loss of 29,500 jobs and an increase in the unemployment rate to 6.9% from 6.8%. The negative data comes on the heels of news China halted some coal shipments as part of an on-going feud with the government. However, it was RBA Governor Philip Lowe who fueled AUDUSD losses.
He warned that additional stimulus and rate cuts were on the agenda. AUDUSD tumbled to 0.7069 from 0.7168. NZDUSD suffered from broad US dollar strength.
USDCAD rallied on the back of the negative risk sentiment, and widespread commodity currency selling. USDCAD direction remains at the mercy of US dollar sentiment, with domestic data, and politics largely ignored.
The weekly US jobless claims numbers are not expected to show much improvement from last week’s 840,000 result, which won’t do anything to alleviate the current hostile risk environment. The Philadelphia Fed Manufacturing Survey is due.
USDCAD Technicals: The intraday technicals are bullish following the break above 1.3150, looking for a move above 1.3210 to extend gains to 1.3250. Longer term, a decisive break above 1.3222 targets the 1.3343, the 76.4% Fibonacci retracement of the October range. For today, USDCAD support is at 1.3150 and 1.3110. Resistance is at 1.3210 and 1.3250. Today’s Range 1.3150-1.3240
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank