October 20, 2020
- Euro area stocks mixed; US Futures rise, in lackluster trading
- EURUSD outperforming, supported by EU issuance of “social bonds”
- US election and stimulus talks sap FX enthusiasm
FX Ranges at a Glance
Source: IFXA Ltd/RP
FX Recap and Outlook: The US Democrat’s deadline to strike a stimulus deal expires at midnight, and the US election is just two weeks away. That was enough to sap trading enthusiasm in most markets, overnight.
Chinese equity markets rallied while Japan’s Nikkei 225 and Australia’s ASX200 slipped. Eurozone bourses are mixed, either side of unchanged. US equity futures are higher but need to make up a lot of ground to recoup yesterday’s Wall Street losses.
The US election continues to be a major uncertainty for markets, despite Joe Biden’s substantial lead in polls. That’s because Hillary Clinton was in the same boat in 2016, and she got Trumped.
EURUSD traded sideways until just before NY opened, then prices climbed from 1.1761 to 1.1817. The single currency is underpinned by the EU “social bond” issue. The EU planned to raise €10 billion from the sale of 10 year bonds, and €7 billion from 20-year bonds. The reportedly received €223 billion in orders. There are about €1.3 billion in 1.1795-1.1800 EURUSD option strikes expiring at 10:00 am.
GBPUSD traded in a 1.2920-1.2978 range, opening in NY near the top of that band. EU and UK trade talks are continuing. Prices are supported by expectations that Prime Minister Boris Johnson will agree to remove some contentious passages in the Internal Markets Bill, which modestly reduces the risk of a “no-deal” Brexit.
Bank of England Monetary Policy Committee member Gertjan Vlieghe warned that more BoE stimulus is needed.
USDJPY traded firmer in a narrow 105.443-105.61 range, in part due to demand for EURJPY. Gains may be limited due to uncertainty around the US election and the second wave coronavirus outbreak.
AUDUSD got slammed on dovish comments by Assistant Governor Chris Kent, and from the dovish RBA minutes from the October 1 meeting. Mr Kent said that there was room to cut the OCR (overnight cash rate) further, while suggesting the RBA could expand its bond-buying program. AUDUSD dropped from 0.7069 to 0.7032.
NZDUSD tracked AUDUSD lower, helped along by dovish remarks from RBNZ Governor Orr who suggested there was room to increase QE program.
USDCAD drifted quietly inside a narrow 1.3174-1.3202 range overnight and ticked down to 1.3169 in early NY trading. Prices are tracking EURUSD moves.
The quarterly Business Outlook Survey showed a rebound in sentiment, which was expected as COVID-19 lockdown measures were being eased. The Business Outlook indicator was a weak -2.2.
The Canadian economic calendar is empty while US Building Permits and Housing data are released.
USDCAD Technicals: The intraday technicals are directionless inside a narrow 1.3150-1.3205 band. A topside break will extend gains to 1.3250, and then 1.3340. A move below 1.3150 targets 1.3100 and 1.3040. For today, USDCAD support is at 1.3150 and 1.3110. Resistance is at 1.3205and 1.3250. Today’s Range 1.3140-1.3220
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank