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Intermarket:
- SP Futures 3305 (+1.27%)
- EUSTXX 2967 (+0.71%)
- Crude Oil 37.53 (+0.33%)
- US 10YR 0.78
- EurUsd 1.1755 (+0.08%)
- UsdJpy 104.38 (+0.05%)
- DAX 11595 (+0.67%)
Despite profit-taking in Asia trade, risk remains broadly sold on rising Covid infections prompting fresh lockdowns for at least a month in France and Germany and new daily high numbers were seen in Italy, Spain, Portugal and Poland. Traders are thus expecting a dovish tone from the ECB when it meets later today, even though no policy changes are expected.
Along the same lines, Dr Anthony Fauci opined that vaccines would not be available in the US until January 2021. As for the impending US elections, most analysts have a 70-80% chance of a Blue Wave (which they suggest would be supportive for risk given Biden’s front-loaded economic package), a 20% change of a Divided Government, a 1% chance of a Red Wave (which analysts see as negative for risk) and an equally small chance of a Contested Election (which would be also negative for risk).
Looking ahead: we get US’ 3Q20 GDP growth (which is likely to reflect the strongest rebound at 32% qoq annualised following the 2Q dive of -32.4% qoq), initial jobless claims, German CPI. Companies announcing earnings include Facebook, Twitter, Amazon, Alphabet, CCB, Standard Chartered.
Matters that Matter:
• BoJ keeps policy steady as eyed, trims growth, price forecasts, keep eyes on FX, commodity prices
• Japan PM Suga – Will take budgetary steps to help economy
• Biden, if elected, would consult allies on future of U.S. tariffs on China-advisers
• Poll: Global economic rebound at risk from rising COVID-19 cases
• As COVID persists and U.S. election nears, China growth lifts Asia – Reuters analysis
• ECB to pave way for more stimulus as recession fears grow
• France and Germany thrust into lockdown as second COVID-19 wave sweeps Europe
• BoC gov Macklem – U.S. Q4 growth could be even weaker than projected, likely to hit Canada exports
• NZ Oct NBNZ Business Outlook, -15.7, -28.5 prev
Majors 1-Day View:
USDJPY
- Despite an initial drop to 104.10s, buyers returned to the market yesterday from extended levels, prices closing little changed. Further buying in Asia has improved signals marginally and the call is to buy a dip towards yesterday’s low.
- Profit taking from extended levels may extend, but sentiment is still sour on Covid-19, election uncertainty.
- BOJ not a factor.
EURUSD
• Prices posted losses of ¾ Big Fig on Wednesday, declining to 6-day lows. Profit taking has materialised, stalling the decline. However, signals are still pointing lower and the call is to sell on rallies towards 1.1770s today.
• Eur lower as France/Germany lock down parts of the country.
• ECB due today: dovishness expected.
AUDUSD
• Prices posted a bearish outside day on Wednesday, posting a 5 day low at .7038. Buyers returned during Asia trade and while the recovery may extend, we suggest selling into rallies towards .7100.
• Prices driven more by risk sentiment than local factors.
• Offers reported around .7070.
GBPUSD
• Despite posting a 5-day low yesterday at 1.2917, buyers returned to the market with prices recovering half of the day’s drop. Further buying in Asia has extended the recovery and the call is thus to buy dips towards 1.2950s.
• Brexit still the main issue for the Pound.
• Covid-19 cases appear to double every 9 days – Imperial College
FX Relative ATR Grid
Comment: After contracting for 3 consecutive sessions, ranges expanded yesterday with some currencies reaching extended levels. We would not expect another expansion today except perhaps on EUR, depending on the ECB’s response.
FX Relative Strength Grid
Comment: the main signals going into Thursday are CAD and NZD weakness vs. USD and JPY strength.