January 5, 2021
- Georgia run-off vote today-Trump to challenge results for eternity
- UK locks down country
- US dollar gives back some of yesterday’s gains
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: The US dollar appeared ready to free-fall yesterday morning. It didn’t happen. Instead, spiking numbers of COVID-19 cases in the US and UK, uncertainty around today’s Georgia Senate run-off vote, spooked traders.
Wall Street opened at record highs, then promptly turned turtle, led by a 1.48% drop in the S&P index. Falling stocks fueled US dollar demand, and the greenback soared.
Asia FX traders didn’t see what all the fuss was about. They were US dollar sellers from the get-go. Asia equity markets closed with small losses except the Chinese stock indexes, which surged.
European bourses are mixed. The UK FTSE 100 is a touch higher while the German Dax and French CAC are close to flat. Wall Street futures are modestly higher as are gold prices.
EURUSD climbed steadily overnight, rising from 1.2248 to 1.2284 in early NY trading, but remains well-below yesterday’s 1.2307 peak. EURUSD remains in demand thanks to expectations for a COVID-19 vaccine-fueled, global economic recovery, supported by the Fed’s stated plan of leaving US interest rates at extremely low levels. Prices may have seen a bit of support after German Retail Sales rose 1.9% m/m in November, compared to forecasts for a 0.2% decline. German unemployment data was also better than expected. The EURUSD technicals are bullish above 1.2170, looking for further gains to 1.2530.
GBPUSD plunged from 1.3702 to 1.3540 yesterday when risk sentiment turned negative, fueled by new that Prime Minister Boris Johnson was reimposing coronavirus lockdown measures last seen in the spring of 2020. Falling equity markets contributed to the retreat. But that was yesterday. Today, prices climbed from 1.3556 to 1.3600, tracking the shift back to positive risk sentiment. The intraday technicals are bullish above 1.3550 with a break above 1.3610, putting 1.3700 back in play.
USDJPY retreated on the back of renewed US dollar weakness. Japan Prime Minister Yoshihide Suga said they will decide about declaring a coronavirus sparked, State of Emergency on Thursday. USDJPY dropped from 103.18 to 102.81 in NY.
AUDUSD lost 0.92% yesterday, falling from 0.7737 to 0.7641, a 0.92% drop. Prices recovered overnight, rising to 0.7722, on the back of higher iron-ore prices, and improved risk sentiment. NZDUSD mirrored AUDUSD moves.
Oil prices are choppy with WTI trading in a $47.25-$49.80/barrel range in the past 24 hours. Prices got a short-lived boost from news that Iran hijacked a South Korea flagged oil tanker. The gains were erased due to over-supply concerns that a global economic recovery may be delayed by the latest coronavirus outbreak.
USDCAD posted a low last seen in April 2018 yesterday, then spiked higher on the back of the broad, risk-off US dollar rally, which took prices to 1.2794 which was also the two-week downtrend line level. Prices retreated to 1.2732 in early NY trading today. Direction will continue to be determined by global risk sentiment.
US ISM Manufacturing PMI is expected to show 56.6 for December.
USDCAD Technicals: The USDCAD technicals appear to have shrugged off yesterday’s “bullish reversal” day, in part because the downtrend line from October 28 peak contained gains. The technicals are bearish below 1.2805, looking for a decisive break of 1.2670 to extend losses to 1.2500. For today, USDCAD support is at 1.2730 and 1.2670. Resistance is at 1.2770 and 1.2805. Today’s Range 1.2705-1.2805
Chart: USDCAD hourly
Source: Saxo Bank
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