USD weakens, stocks rise on stimulus hopes

The USD tended to weaken against most of its counterparts, as market hopes for a fiscal stimulus tended to push it lower. US President Trump stated that he would be willing to accept a large stimulus bill despite opposition from his own party, the Republicans, fuelling hopes that a fiscal stimulus package could be agreed. The news provided a boost to treasury yields which were on the rise, as the anticipations for increased borrowing by the US government also rose. At the same time US stock-markets were on the rise as market sentiment improved also due to the earnings reports of various companies. For today we would highlight the earnings releases of Tesla, while tomorrow we get Amazon’s, Coca Cola’s and Microsoft’s releases and on Friday we note the earnings of Barclay’s Bank and American Express. The stock-markets were on the rise even despite the fact that the US Department of Justice filed an antitrust lawsuit against Alphabet yesterday, which is expected to lead to a legal battle which could last for some years. We expect market sentiment to be driven fundamentally by the chances of a fiscal stimulus package being agreed upon in the near term and should there be further indications implying such a scenario, we could see the USD weakening further.
US 500 Cash rose yesterday after opening with a positive gap, yet in the late trading session, tended to correct lower. We maintain our bearish outlook for the index as it seems to remain under the spell of the downward trendline incepted since the 12th of October. Should the bears maintain control over the index’s direction we could see S&P 500 breaking the 3425 (S1) line and aim for the 3375 (S2) level. Should the bulls take over, we could see the index breaking the prementioned downward trendline, the 3490 (R1) line and aim for the 3545 (R2), which marks the highest peak since the 12th of October.

CAD on the rise despite political turbulence in Ottawa

The Loonie tended to strengthen against the USD yesterday, benefiting from the risk on sentiment of the market and despite the political unrest in Ottawa. There seems to be some uncertainty in the political stage of Canada, as Canada’s Prime Minister Trudeau, has put the fate of his Liberal government on the line. PM Trudeau stated that an opposition move to probe the government’s handling of the pandemic, is to be put to a confidence vote for the government. We tend to expect that should there be a confidence vote, still the Canadian Prime Minister could survive it politically, gathering the necessary votes. Nevertheless the market seems to have shrug off the news and supported the Canadian dollar as chances for a US stimulus seemed to be on the rise while at the same time it should be noted that oil prices tended to inch up higher yesterday also supporting the CAD. We expect Loonie traders to also keep a close eye on the release of the CPI rates as well as the retail sales growth rate, both due out today.
USD/CAD retreated breaking the 1.3150 (R1) support line now turned to resistance. We maintain a bearish outlook for the pair as the downward motion since to be ongoing and the RSI indicator below our 4 hour chart seems to confirm the presence of the bears, given that it approaches the reading of 30. However please note that the pair has reached a 5 week low at the current moment. Should the selling interest for the pair be maintained, we could see USD/CAD breaking the 1.3035 (S1) line and start aiming for the 1.2955 (S2) level. Should buyers be in charge of the pair’s direction, USD/CAD could reverse course and breaking the 1.3150 (R1) level, aiming for the 1.3240 (R2) barrier which contained the pair’s ascent on the 16th of October.

Other economic highlights today and early tomorrow

Today during the European session we note the CPI rates for October for the UK. In the American session we get Canada’s CPI rates for September and the retail sales growth rate for August and a bit later the weekly US EIA crude oil inventories figure. Also we have a high number of speakers scheduled, among which we highlight ECB President Lagarde.

US 500 Cash 4 Hour Chart

Support: 3425 (S1), 3375 (S2), 3320 (S3)

Resistance: 3490 (R1), 3545 (R2), 3585 (R3)

USD/CAD H4 Hour Chart

Support: 1.3035 (S1), 1.2955 (S2), 1.2885 (S3)

Resistance: 1.3150 (R1), 1.3240 (R2), 1.3320 (R3)

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