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November 12, 2020
- FX markets hamstrung by US election dysfunction
- US core headline and core CPI unchanged while Jobless claims beat forecasts
- US dollar opens mixed-Commodity bloc and GBP lower
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook US weekly jobless claims were lower than expected at 709,000, compared to last weeks upwardly revised 757,000 result. October CPI was unchanged. The US dollar reaction was minimal and fleeting.
FX markets were looking lost in overnight price action. Traders continue to ignore the rising number of new US coronavirus cases, which topped 135,428 yesterday, preferring to focus on hopes for a vaccine. Trump’s former favourite pandemic adviser Dr Fauci said a vaccine could be available by April.
EURUSD dropped to 1.1760 in Asia on follow-through selling from ECB President Christine Lagarde’s dovish remarks yesterday and the report that the ECB cut its 2021 growth forecast to 3.7% from 4.9%. Her views were repeated by ECB policymaker Luis De Guindos saying further fiscal stimulus was needed. The ECB Bulletin, released today, warned of a slow, uneven recovery, and highlighted downside risks to growth. EURUSD rallied in Europe and topped out at 1.1822 in early NY trading Eurozone Industrial production was not a factor nor was German CPI data. The intraday technicals turned bullish with the recovery above 1.1790 and are looking to extend gains to 1.1870.
GBPUSD dropped from 1.3227 to 1.3183 in Asia, and the bounced between 1.3163-1.3200 in Europe. There was a slew of UK economic data, including Q3 GDP (15.5% q/q), Manufacturing Production, Industrial Production, and Trade data.
The results are still below pre-pandemic levels and expected to worsen following the second-wave COVID-19 lockdown measures. GBPUSD is suffering as the deadline for a Brexit deal nears.
USDJPY dipped then climbed in a 105.16-105.46 range. Prices were weighed down by caution around weak Asia equity markets (except Japan’s)while supported by steady to firm US Treasury yields and optimism about a COVID-19 vaccine.
AUDUSD and NZDUSD traded softer on the back of profit-taking. RBNZ Assistant Governor Christian Hawkesby said that the New Zealand economy might need less stimulus than previously though, which reduced concerns about negative interest rates.
The International Energy Agency (IEA) cut its forecast for 2020 oil demand by 400,000 barrels per day. The resurgence of COVID-19 in the US and Europe is behind the move.
USDCAD rallied in Asia, then retreated in Europe, with price action dictated by broad US dollar moves against the majors. Canadian dollar direction continues to be dictated by external forces with domestic policies having little bearing on the rate.
Today’s US data includes October CPI (forecast 0.2% m/m) and Initial Jobless Claims (735,000). Bank of Canada Senior Deputy Governor Carolyn Wilkins gives a speech today.USDCAD Technicals: The intraday technicals are bearish while prices are below 1.3105, looking for a move below 1.3040 to extend losses to 1.2950. A break above 1.3105 suggests a retest of 1.3250 is likely. For today, USDCAD support is at 1.3040 and 1.2990. Resistance is at 1.3105 and 1.3160. Today’s Range 1.3030-1.3130
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank