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Intermarket:
- SP Futures 3455 (+0.68%)
- EUSTXX 3236 (+0.31%)
- Crude Oil 41.53 (-0.42%)
- US 10YR 0.80 (+0.36%)
- EurUsd 1.1846 (+0.21%)
- UsdJpy 105.28 (-0.20%)
- DAX 12784 (+0.31%)
Hopes that the Democrats and Republicans are still talking and potentially closing in on a compromise continued to underpin risk sentiment. US Yields steepened as House Speaker Pelosi expressed optimism that a stimulus bill is in the pipeline, despite contrary remarks from Senate Republicans. From a trader’s perspective, it’s all more of the same and markets remain headline-driven.
Also supporting sentiment is the news that AstraZeneca’s COVID-19 vaccine trial in the US is expected to resume as early as this week after the U.S. Food and Drug Administration completed its review of a serious illness in a study participant.
Looking ahead: UK CPI (which may come in lower as shop prices fell in September), cad Retail Sales and CPI (which may show improvement after a stronger employment report and IVEY PMI) as well as the Fed’s Beige Book. ECB’s Lagarde, Lane and Guindos, as well as Fed’s Mester, are also on tap today. Besides all that, Brexit talks continue today.
Matters that Matter:
• US coronavirus aid talks still in peril amid Republican opposition as McConnell warned a large size package would not pass the Senate
• U.S. trial of AstraZeneca COVID-19 vaccine may resume this week -sources
• Chicago Fed Evans Sees less economic drag from new wave of infections
• Australian retail sales fall again in Sept, but outlook firm, Sept m/m retail sales -1.5% vs -4% in Aug
Majors 1-Day View:
USDJPY
- Sellers returned to the market yesterday from close to the 50 DMA, prices posting a little changed close. Further selling in Asia interrupted the sequence of higher daily lows and signals switch to bearish.
- Contacts report offers from 105.70/80 and bids around 105.00 likely linked to option expiries today.
EURUSD
• Prices have posted a fresh high for October on USD weakness, via a developing trend of higher daily highs & lows. With buyers still evident during Asia trade, the outlook for today remains bullish.
• Prices driven by US stimulus probability. USD lower on positive developments as Pelosi and Mnuchin close to deal.
• Markets ignoring contrary information from Senate Republicans.
• Contacts report bids ahead of 1.1800
AUDUSD
• Buyers returned from 3 week lows on Tuesday, and further buying in Asia has taken prices above Tuesday’s top. As such, signals are improving and the call is to buy dips today.
• Prices driven by US fiscal stimulus talks.
• Hope of a deal is supporting risk.
GBPUSD
• Signals remain mixed amidst volatile rangebound trading. Prices traded in line with this bias on Tuesday, remaining within Monday’s range and closing little changed. However, a developing trend of higher daily lows would suggest a slight bullish bias for today.
• Markets trading on Brexit headlines as brinkmanship continues.
• Focus also on Covid-19 response.
FX Relative ATR Grid
Comment: Ranges remain healthy into Wednesday trading.
FX Relative Strength Grid
Comment: the main signals going into Wednesday are JPY & Kiwi weakness vs. EUR and CAD strength.