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Intermarket:
- SP Futures 3411 (-0.62%)
- EUSTXX 3150 (-0.67%)
- Crude Oil 39.75 (-0.69%)
- US 10YR 0.82 (+0.19%)
- EurUsd 1.1846 (-0.10%)
- UsdJpy 104.70 (+0.11%)
- DAX 12460 (-0.65%)
Markets are once again in risk-off mode after House Speaker Pelosi and a Trump tweet dampened hopes of a fiscal stimulus bill before the 3rd November election. The USD was broadly lower while gold prices rose. Meanwhile, Covid cases hit a record in Italy, Germany and the Netherlands, while the Czech government warned of the risk of a healthcare system collapse and cases in New York surged above 2,000 for the first time since May.
More of Northern England is preparing for lockdown with South Yorkshire joining Liverpool and Lancashire in the highest tier on Saturday. Also, many regions in Italy have imposed a curfew from 11PM to 5AM.
Also, let’s not forget the US elections which are approaching fast. The possibility exists that results will be contested in every state with COVID, key battleground states essentially split down the middle and old/inefficient mail-in ballot system.
Looking ahead: US’ initial jobless claims is the only piece of data on tap today. BOE’s Haldane and Bailey, Fed’s Barkin, Daly and Kaplan are speaking today. Brexit talks also resume today. Finally, the last presidential debate between Trump and Biden will take place tonight.
Matters that Matter:
• U.S. coronavirus aid prospects uncertain after Trump blasts Democrats
• U.S. intelligence agencies say Iran, Russia have tried to interfere in 2020 election
• Fed Brainard - Warns economic disparities may hold back US recovery, more fiscal support needed – FT
• Over half Europe’s small firms fear for survival, survey finds
• RBNZ’s Robbers – Bank resilience may be tested as loan losses rise
Majors 1-Day View:
USDJPY
- After yesterday’s 1 Big Fig drop, signals remain negative. However, buyers returned during Asia trade and while the rally should be corrective, it may extend. As such the call is to sell rallies towards 105.00.
- Jpy crosses also on the back foot.
- Upside limited by option expiries: 2.85 Bln 104.50-55, 1.1 Bln 104.90-95
EURUSD
• Prices have posted the 4th higher daily low in a row, reaching 4 week highs at 1.1880. Signals remain bullish for today but prices are now becoming extended on an intraday basis. As such we prefer to buy dips towards the October 9th top at 1.1830.
• Prices driven by US stimulus probability. USD lower as deal seems to be fading.
• Contacts report bids ahead of 1.1800
AUDUSD
• Yesterday’s ¾ Big Fig rally has stalled recent downwards momentum and leaves trend signal more mixed. Sellers have returned to the market in Asia this morning at the 13 day average rate and the pullback has the potential to deepen. The call is to buy on a dip towards .7070s.
• Risk off as prices driven by US fiscal stimulus talks.
• Equities weigh on Aud.
GBPUSD
• Yesterday’s 2 Big Fig gain leaves signals bullish and extended at the same time. As such, pullbacks are to be expected and we prefer to buy the dip towards the Oct 12 top at 1.3080.
• Markets trading on Brexit headlines as brinkmanship continues.
• Focus also on Covid-19 response.
FX Relative ATR Grid
Comment: Ranges remain healthy into Thursday trading.
FX Relative Strength Grid
Comment: the main signals going into Thursday are USD weakness, CAD weakness and EUR weakness vs. GBP, CHF and NZD strength.