October 28, 2020
- US election and Coronavirus chase risk seekers into arms of US dollar
- European equities, Wall Street futures awash in a sea of red
- Bank of Canada monetary policy meeting ahead
FX Ranges at a Glance -NY close to NY Open
Source: IFXA Ltd/RP
FX Recap and Outlook: Traders are proving that they can both run and hide. The surging number of positive COVID-10 tests in Europe, UK, and the US fueled a stampede into the US dollar. Asia equity indexes closed on a mixed note. Japan and Hong Kong were down while China and Australia finished higher. European bourses are getting spanked, led by a 2.73% decline in the Germans DAX. US equity index futures are down. The S&P 500 lost 1.80% and DJIA futures fell over 1.5%. as of 8:30 am ET.
The US dollar opened in NY with gains across the board and added to those gains in early trading, led by a 0.88% drop in AUD, as of 8:30 am ET.
French President Emmanuel Macron will address the nation and markets fear he will lock-down the country for 28 days, in response to a second-wave of COVID-19 infections. Germany is reportedly considering a two-week lock-down. Italian protesters are complaining about the latest restrictions.
US coronavirus cases rose 73,627 yesterday. Most of those infected are hoping to recover feeling 20 years younger, just like Donald Trump.
The failure of the COVID -19 Relief bill negotiations and caution ahead of the US election contributed to the risk-averse sentiment. Although Biden leads in the polls, traders are reluctant to trust the findings.
EURUSD continued yesterday’s slide, falling from 1.1794 at the close to 1.1742 in Europe and 1.1722 in NY. The sell-off was sparked by yesterday’s robust US Durable Goods Orders, which rose 1.9% compared to forecasts for a 0.4% increase. Traders are also concerned about tomorrow’s ECB monetary policy meeting, fearing that the second wave of the coronavirus may force a stimulus response sooner than expected. The intraday technicals are bearish below 1.1820, looking for a break of support at 1.1735 to extend losses to 1.1670.
GBPUSD dropped alongside the G-10 majors, falling from 1.3063 to 1.2918, due to broad US dollar buying and rising UK COVID-19 cases which topped 22,885 yesterday. GBPUSD is also suffering from the lack of progress in Brexit talks with fishing rights a major obstacle. EU Council President Charles Michel mused about whether a deal was even possible.
USDJPY dropped from 104.55 in Asia to 104.13 in NY trading due to safe-haven demand for yen sparked in part, by the lack of a stimulus deal in the US. A break below 103.90 targets 103.05.
AUDUSD rallied from 0.7129 to 0.7156 in Asia, supported by higher than expected inflation. CPI rose 0.7% y/y compared to -0.3% previously. NZDUSD tracked AUDUSD higher. Both currency pairs collapsed in Europe and NY trading, under the wave of risk aversion sentiment.
USDCAD traded sideways in Asia then climbed in Europe, following the lead of EURUSD and the antipodean currencies. The domestic currency is unlikely to get any support from today’s BoC monetary policy meeting. The Bank is expected to leave interest rates while expressing caution about downside risks from the coronavirus.
The Canadian and US economic calendars are empty.
USDCAD Technicals: The intraday technicals are bullish with the break above 1.3220 snapping the downtrend line from the end of September, and shifting the focus to 1.3305 where the April downtrend comes into play. For today, USDCAD support is at 1.3220 and 1.3180. Resistance is at 1.3290 and 1.3310. Today’s Range 1.3210-1.3310
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank