Market participants are concerned about the prospects for recovery of national economies due to the imposition of new restrictive measures in some countries, including France, Germany, Spain and Italy, amid a surge in coronavirus cases. The UK government on Thursday also announced new quarantine measures in London.
Lack of progress in the Brexit talks and the new stimulus package stateside has put the dollar on the front foot. Last week, the White House offered a $1.8 trln state aid package, but Democrats are pushing for at least $2.2 trln. House Speaker Nancy Pelosi said on Tuesday that the proposal falls significantly short of what the pandemic and the deep recession demand. Treasury Secretary Stephen Mnuchin said that a deal would be hard to reach before the November 3 presidential election.
Today’s macro agenda (GMT 3)
- 12:00 Eurozone: CPI and balance of trade (August)
- 15:30 Canada: foreign securities purchases and manufacturing sales (August); US: retail trade (September)
- 16:15 US: industrial production (September)
- 17:00 US: Michigan inflation expectations, NAHB housing market index (October), business inventories (August)
- 20:00 US: Baker Hughes weekly oil rig count
- 23:00 US: foreign bond investment (August)
In Asian trading, major currencies are trading in the red, except for the yen. The Australian dollar is a standout decliner, underscoring investors' risk aversion.
In technical terms, the price action is hovering around 112 degrees. The 1.1668-1.1695 range (112 – 135 degrees) is a reversal zone for the euro. It will obviously not protect longs in case of negative news, but the price action often unfolds within it.
At the time of writing, EURUSD was trading at 1.1709 and GBPUSD at 1.2938. Cable bounced off 1.2890 and this is a positive factor for buyers before the North American trading session opens. All the latest moves are being driven by breaking news.
Market participants will be watching for Brexit news and developments regarding the adoption of a new coronavirus relief bill for the US economy. Today the following levels can be singled out: 1.1695 (135th degree) and 1.1725 (the trend line and LB line). If positive news rolls in from Donald Trump or Nancy Pelosi, we could see the euro strengthen to 1.1752. Conversely, if negative news breaks out, support will kick in at 1.1670.