USD weakens as market sentiment improves

The USD weakened against some of its counterparts on Friday yet tended to show some signs of stabilisation during today’s Asian session. The market seems to be focusing on the prospects of a possible vaccine for COVID-19, causing safe haven outflows for the USD while at the same time preferring riskier assets. It was characteristic that commodity currencies were on the rise, as well as US stock markets, while also gold benefited from a weaker USD. On the flip side, coronavirus cases are surging on a global level and still tend to fuel worries for the effect on the recovery of the US economy. Should market sentiment continue to improve, the USD could extend losses, while should a more risk off mood prevail, USD could start gaining. AUD/USD rose on Friday, testing the 0.7300 (R1) resistance line during today’s Asian session. As the pair in its upward motion broke the downward trendline incepted since the 11th of November, we switch our bearish outlook in favour of a bullish outlook for the pair. Should the bulls continue to guide the pair, we could see AUD/USD breaking the 0.7300 (R1) line and aim for the 0.7410 (R2) level. Should the bears take over, we could see the pair breaking the 0.7200 (S1) support line and continue southwards.

EU-UK negotiations to enter key week

The pound marked some slight gains against the USD the EUR and JPY, reversing Thursday’s losses, as the UK enters a key week of negotiations after missing its 15th of November deadline. UK’s top Brexit negotiator Frost stated yesterday that some progress was made in the negotiations, yet the two sides may not succeed in reaching an agreement. Also, news that Dominic Cummings, Johnson’s close advisor, is set to resign tended to increase hopes for a possible deal between the EU and the UK. On the other hand, the UK government signalled that its position in the negotiations is not going to change because of the resignation of two of Brexit’s architects. Should headlines start highlighting the risks surrounding a possible no deal scenario, we could see the pound losing some ground and vice versa.
GBP/USD on Friday reversed the downward course of the past two days, breaking the 1.3150 (S2) and 1.3210 (S1) resistance lines, both now turned to support. As the pair broke the downward trendline incepted since the 11th of November, we switch our bearish outlook in favour of an upward movement. Should buyers be in charge of cable’s direction, we could see the pair aiming if not breaking the 1.3285 (R1) line aiming for higher grounds. Should a selling interest be displayed by the markets, we could see GBP/USD breaking the 1.3210 (S1) support line and aim if not break the 1.3150 (S2) level.

Other economic highlights today and early tomorrow

Today in the European session, we get Norway’s trade data for October, while in the American session, we note the US NY Fed Manufacturing index for November and Canada’s manufacturing sales for September. Also note that RBA Governor Lowe, ECB’s De Guindos, President Lagarde and Mersch, BoE’s Haskel, San Francisco Daly and RBA’s Kent are scheduled to speak, while RBA is to release the minutes of its last meeting.

As for the rest of the week

On Tuesday, we get Norway’s GDP rates for Q3, and the US retail sales and industrial production growth rates for October. On Wednesday we get Japan’s trade data for October, Australia’s wage price index for Q3, UK’s CPI rate for October, Eurozone’s final HICP rate for October and Canada’s inflation rates also for October. On Thursday, we get Australia’s employment data for October, UK’s CBI trends for Orders for November, Turkey’s CBRT interest rate decision, and from the US the weekly initial jobless claims figure as well as the Philly Fed Business index for November. On Friday, we get Japan’s inflation rates for October, Japan’s preliminary Jibun Manufacturing PMI for November, UK’s and Canada’s retail sales for October as well as the preliminary consumer confidence indicator of the Eurozone for November.

AUD/USD H4 Chart

Support: 0.7200 (S1), 0.7100 (S2), 0.7025 (S3)

Resistance: 0.7300 (R1), 0.7410 (R2), 0.7480 (R3)

GBP/USD H4 Chart

Support: 1.3210 (S1), 1.3150 (S2), 1.3085 (S3)

Resistance: 1.3285 (R1), 1.3375 (R2), 1.3470 (R3)

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