USD remains strong after debate

The USD strengthened further yesterday against some of its counterparts, continuing its recovering after the drop in the past few days and passed the debate without much volatility. The debate was fierce, yet the two candidates seemed to be more restrained in comparison to the first debate as they largely kept within time limits and the discussion was less chaotic. Overall, the debate failed to provide a clear winner in the sense that no one of the two candidates showed to have the edge over the other, keeping practically the situation unchanged, yet there are indications that the US President may be closing in on Biden. As for the fiscal stimulus negotiations, House of Representatives speaker Nancy Pelosi stated yesterday that the negotiations were making progress with the White House, yet once again Senate Republicans seem to be negative. We still see that the chance of a fiscal stimulus being approved before the US Presidential elections is rather slim yet any headlines showing further progress could cause safe haven outflows for the USD. On the other hand, it should be noted that such a stimulus seems to be badly needed for the US economy so some sort of deal is expected, yet the elections may complicate the situation.
AUD/USD maintained a rather sideways motion hovering over the 0.7100 (S1) support line. Currently we tend to maintain a bias for a sideways motion until the pair decides the pair of its next leg, yet US fundamentals could create some volatility for the pair. Should a selling interest be displayed, we could see the pair breaking the 0.7100 (S1) support line and aim for the 0.7025 (S2) level which reversed the pair’s downward course on the 20th of October. Should the buyers take over, we could see AUD/USD aiming if not breaking the 0.7200 (R1) resistance line.

Rise of Covid 19 cases weighs on the common currency

The common currency weakened against the USD, largely driven also by the strengthening of the US currency, yet also the rising COVID-19 cases in Europe seem to weigh on EUR. The situation seems to be especially grave in France given that yesterday’s new infection cases surpassed 41k, increasing market worries. It’s characteristic that reportedly, France extended its curfew lockdown measures for some 46 million of its residents. The situation remains worrying also for other parts of Europe as Germany yesterday had over 11k new cases and Italy confirmed 16k new infections yesterday. We expect that the new restriction measures in place could intensify without ruling out even a possible full lockdown for various parts of Europe, and the resurgence of the pandemic could drag on Eurozone’s economic recovery slowing it down. Today, we expect EUR traders to keep a close eye on the release of the preliminary PMI’s of October, as the slowdown of economic activity will be put to the test.
EUR/USD extended its slide against the USD testing the 1.1790 (S1) support line. We maintain a bearish outlook for EUR/USD, as the downward trendline incepted since the 21st of October, seems to be guiding the pair however it should be noted that the 1.1790 (S1) line seems to be presenting substantial support for the pair during today’s Asian session. Should the bears actually keep control over the pair’s direction, we could see EUR/USD breaking the 1.1790 (S1) support line and aim for the 1.1720 (S2) level. Should the bulls take over, we could see EUR/USD reversing course, breaking the prementioned downward trendline and aim if not break the 1.1850 (R1) line.

Other economic highlights today and early tomorrow

Today during the European session, we get UK’s retail sales growth rate for September, yet the highlight of the day is expected to be the release of the preliminary PMIs of October for France, Eurozone, Germany and the UK. In the American session, we get the US Markit preliminary PMIs for October and the US weekly Baker Hughes oil rig count. As for speakers, please note that BoE MPC member Ramsden speaks.