USD Weakens on Stimulus Hopes: Market Reaction

The USD weakened on Friday on stimulus hopes yet was able to retrieve some ground today during the Asian session as COVID 19 cases were on the rise in the US and EU. It should be noted that House of Representatives speaker Nancy Pelosi stated yesterday that she was waiting for a response from the White House regarding the stimulus package on Monday, so some action around the subject could be expected. Stimulus hopes receded though during today’s Asian session, as there seems to be a lack of actual signs that a possible deal is nearer, and the market seems to have grown tiresome from the coming and going. On the other hand, worries increased in the US about the course of the pandemic as coronavirus cases in the US for two consecutive days have reached new record highs, increasing uncertainty. We still maintain the view that the stimulus package and COVID 19 along with the US elections are the main fundamentals driving the market in the US and any signs that a stimulus package deal is possible could weaken the USD.
EUR/USD bounced on the 1.1790 (S1) support line and rose to test the 1.1850 (R1) resistance level yet failed to clearly break it returning lower during today’s Asian session. As the pair broke the downward trendline incepted since the 21st of October, we tend to maintain a bias for a wide sideways motion of the pair between the prementioned levels, yet today’s fundamentals on both sides of the pair could alter its direction. If a selling interest is displayed, EUR/USD could break the 1.1790 (S1) line and aim for the 1.1655 (S2) level. If buyers be in charge, we could see EUR/USD breaking the 1.1850 (R1) line and aim for the 1.1910 (R2) level.

Pound weakens as UK economic outlook darkens

The pound weakened against the USD,JPY and the EUR on Friday as worries about UK’s economic outlook tended to increase, especially after the PMI releases for October. It’s characteristic that the services sector PMI dropped more than expected signalling the slowdown of the expansion of economic activity in the vital sector. Also worries seem to mount as COVID 19 cases were on the rise and worries for the possible adverse effects of a second wave on the economy intensified. It should be noted that negotiations about Brexit with the EU show some progress according to officials, yet fishing rights seem to remain a sticking point. We expect that Brexit remains the main driver for the pound yet the worsening economic outlook for the UK and increased COVID 19 cases, could continue to weigh on the pound.
GBP/USD despite some gains during the European session on Friday, recommenced its slide, yet seemed to hesitate before the 1.3015 (S1) support line. We tend to maintain a bearish outlook for the pair and if so, cable could break the 1.3015 (S1) line and aim for the 1.2945 (S2) level. If the bulls take over, the pair could bounce on the 1.3015 (S1) line and aim if not break the 1.3085 (R1) resistance line, aiming for higher grounds.

Other economic highlights today and early tomorrow

Today, we highlight the release of Germany’s Ifo business climate for October, the US new home sales for September and New Zealand’s trade data also for September.

금주 주요 경제뉴스

On Tuesday, we get the US durable goods orders for September and the US consumer confidence for October. On Wednesday, Australia’s CPI rates for Q3 and from Canada BoC’s interest rate decision are due out. On Thursday, we get from Japan BoJ’s interest rate decision, UK’s Nationwide house price for October, the US GDP (advance) rate for Q3, ECB interest rate decision and Germany’s preliminary HICP rate for October. On Friday, we get from Japan’s Tokyo’s inflation rates for October and the preliminary industrial output for September, France’s, Germany’s and Eurozone’s preliminary GDP rate for Q3, France’s and Eurozone’s preliminary HICP rates for October, the US consumption rate for September, Canada’s GDP rate for August and the final US University of Michigan consumer Sentiment.