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Intermarket:
- SP Futures 3368 (-0.43%)
- EUSTXX 3025 (-1.42%)
- Crude Oil 38.80 (-2.0%)
- US 10YR 0.78
- EurUsd 1.1784 (-0.09%)
- UsdJpy 104.27 (-0.14%)
- DAX 11921 (-1.20%)
The main story impacting markets into Wednesday is the nation-wide lockdown which may be announced tonight around 20.00 CET by French PM Macron. Some analysts suggest it would be more flexible than the one in March, but nothing is confirmed as of yet.
As such, a Covid-19 theme trade is on, with a clear divergence in performance into Wednesday with weakness in Euro and USD vs. strength in AUD, NZD. New Zealand successfully contained the spread of Covid, and Australia is lifting lockdowns with Melbourne opening up for business again. This is in stark contrast to the situation in the US and in Europe, where German chancellor Merkel will meet again today with state premiers to discuss possible new coronavirus restrictions.
Looking Ahead: we get the Bank of Canada decision today, with analysts suspecting no change and a slightly dovish commentary. Beyond that, focus will be on Covid and Brexit headlines.
Matters that Matter:
• Trump concedes no coronavirus relief deal before Nov. 3 election
• U.S. early voting tops 70 million, continuing historic pace
• Analysts suggest Democratic sweep best for economic revival – Reuters poll
• RBA to announce A$100 bln QE next week-Poll
• AU Q3 CPI YY, 0.7%, 0.7% f’cast, -0.3% prev
• Melbourne opens up dining, shopping as virus lockdown lifted
• France mulling month-long national lockdown to combat COVID-19 crisis -BFM TV
• UK Vaccine Taskforce Chair says early COVID-19 vaccines may be imperfect - The Lancet
• COVID-19 cases and hospitalizations surge in Europe, governments once again stepping up containment measures.
• AU PM Morrison: A long road back for Australian economy; support for unemployed still required; welcomes easing of restrictions in Victoria
• RBA Harper: QE is an option and would restrain the Australian dollar; RBA has scope to ease further; negative rates would result in cash hoarding
Majors 1-Day View:
USDJPY
- Prices posted e bearish engulfing yesterday, interrupting a trend of higher daily lows, and strengthening bearish signals. Further selling in Asia trade has consolidated the bearish view for Wednesday.
- Trading to the downside in Asia on lack of US fiscal stimulus and Covid-19 resurgence.
- Options a factor today: 800 Mln at 104.10-25, 2.2 Bln at 104.70-95.
EURUSD
• A failed rally on Tuesday, alongside selling in Asia trade has broken the 1.1800-1870 range, taking prices to a 5 day low at 1.1769. As such, signals for Wednesday are bearish.
• Eur lower as France mulls 1-mth lockdown.
• Eur negatives remain: dovish ECB, Covid-19 cases, lockdowns.
• Offers reported around 1.1800 (option-related) and also 1.1850/80 zone.
AUDUSD
• Prices posted the 2nd inside day and little changed close in a row on Tuesday, leaving trend signals weak. However, with buyers returning during Asia trade, there is a slight upwards bias for Wednesday.
• Encouraging comments from RBA’s as well as successful COVID-19 containment, look supportive. CPI also supportive.
• Support and bids reported at .7100.
GBPUSD
• Prices traded sideways on Tuesday posting a little changed close. As such, trend signals are weak and the call is to remain neutral in between 1.3080 and 1.3000.
• Brexit negotiations continue, headlines to impact the Pound.
• 1.3100 sees 2.6Bln in expiries maturing in the coming sessions.
FX Relative ATR Grid
Comment: Ranges contracted further, with GBP and AUD now poised for a range expansion. Jpy remains the outperformer into today.
FX Relative Strength Grid
Comment: the main signals going into Wednesday are strength in NZD vs weakness in EUR.