01-Oct-2020

1) EUR/USD: Recovery Lacks Bullish Conviction, Eurozone/US PMI Eyed For Fresh Impetus
2) AUD/USD: Rekindles Positive Sentiment; Confronts Heavy Upside Obstacle
3) GBP/USD: Bulls Might Now Aim For A Move Beyond 1.3000 Mark

1) EUR/USD: Recovery Lacks Bullish Conviction, Eurozone/US PMI Eyed For Fresh Impetus

The EUR/USD pair witnessed some intraday selling on Wednesday and slipped back below the 1.1700 mark, albeit showed some resilience at lower levels. The chaotic end of the first US presidential added to the already uncertain environment and dented investors’ appetite for perceived riskier assets. The anti-risk flow drove some haven flows towards the US dollar and was seen as one of the key factors exerting some pressure on the major. The shared currency failed to benefit from better-than-expected German macro data, showing that Retail Sales grew 3.1% and the unemployment rate dipped to 6.3% from 6.4%.

From the US, the ADP reported that private-sector employment grew by 749K in September as compared to market expectations of 650K. Separately, the final GDP report showed that the economy contracted by 31.4% annualized pace during the second quarter of 2020 as against -31.7% estimated previously. Adding to this, Chicago PMI surged to the highest level since the end of 2018 and came in at 62.4 in September, reflecting the resilience of the broader US economy. Robust US macro data, along with renewed hopes for the US fiscal stimulus boosted investors’ confidence and extended some support to the pair.

The US Treasury Secretary Steven Mnuchin told reporters that talks with House Speaker Nancy Pelosi made a lot of progress on long-awaited COVID-19 relief legislation. Mnuchin later said on Fox Business News that he would not accept the Democrats’ proposed $2.2 trillion aid package, while Senate Majority Mitch McConnell said that the two sides remain far apart. The conflicting messages kept a lid on the optimism. Nevertheless, the pair finally settled around 35 pips off daily lows and gained some traction during the Asian session on Thursday, moving back to the top end of its weekly trading range amid a softer USD.

Market participants now look forward to the final version of the September Manufacturing PMI prints from the Eurozone and the US for some impetus. The US economic docket also features the release of Initial Weekly Jobless Claims, core PCE Price Index and the ISM Manufacturing PMI. The data, along with developments over the next round of the US fiscal stimulus will influence the USD price dynamics and produce some meaningful trading opportunities.

From a technical perspective, the emergence of some dip-buying on Wednesday comes on the back of the previous day’s move beyond the 38.2% Fibonacci level of the 1.1168-1.2011 move and favours bullish traders. However, any subsequent move up is more likely to confront a stiff resistance near the 1.1760-65 strong horizontal support breakpoint. Some follow-through buying beyond 100-day SMA, currently near the 1.1790 area (nearing the 23.6% Fibo. level), will negate any near-term bearish bias and pave the way for additional gains.

On the flip side, the 1.1700-1.1690 region might continue to act as immediate strong support and is closely followed by the 1.1660 horizontal zone. A convincing breakthrough might trigger some technical selling and turn the pair vulnerable to slide back to the recent swing lows, around the 1.1615-10 region. The latter coincides with the 50% Fibo. level, which if broken decisively should pave the way for a move towards challenging the key 1.1500 psychological mark. The latter marks an important confluence region – comprising of the 61.8% Fibo. level and 100-day SMA – and should now act as a strong base for the major.

2) AUD/USD: Rekindles Positive Sentiment; Confronts Heavy Upside Obstacle

AUD/USD is encountering tough resistance at the 0.7192 mark after bouncing off the lower band of the cloud that merged with the 100-day simple moving average (SMA), around 0.7005. This fortified barrier coincides with the ceiling of the cloud and is encapsulated by the flattened Ichimoku lines. Nonetheless, the governing tone of the 50-and 100-day SMAs continues to aid the bullish structure.

The short-term oscillators also reflect the pickup in positive momentum. The climbing RSI has reached its neutral threshold, while the rising stochastic %K line has pierced into overbought territory, endorsing additional advances. The MACD, in the negative region, holds slightly below its red trigger line but looks set to return back above it.

To the upside, if buyers manage to jump above the cloud and the adjacent 50-day SMA, fused with the blue Kijun-sen line at 0.7211, the price may shoot for the 0.7344 high. Another leg up may revisit the near 25-month peak of 0.7413. Resuming the ascent, the price may meet the 0.7452 to 0.7483 area of highs from July and August 2018. Overcoming this too, the pair may target the 0.7623 barrier from June 2018 ahead of the 0.7676 high.

If sellers take control, initial support may come from the cloud’s lower boundary around 0.7100 before the 100-day SMA. Next, the neighboring base from the 0.7005 low to the 0.6963 level, which is the 23.6% Fibonacci retracement of the up leg from 0.5506 to 0.7413, could challenge the drop. Diving deeper, the price may hit a strong limiting section from 0.6806 to 0.6749 which also encompasses the 200-day SMA. Sinking further, the price may then rest at the 38.2% Fibo of 0.6680.

In brief, AUD/USD commands a short-to-medium-term neutral-to-bullish bias above 0.7005. Triumphing above 0.7413 may boost this outlook, while a dip under 0.6963 may trigger negative tendencies.

3) GBP/USD: Bulls Might Now Aim For A Move Beyond 1.3000 Mark

The GBP/USD pair had some good two-way price moves on Wednesday and was influenced by a combination of diverging factors. The chaotic end of the first US presidential dented investors’ appetite for perceived riskier assets and drove some haven flows towards the US dollar, which, in turn, prompted some selling around the major. The British pound was further weighed down by the BoE Governor Andrew Bailey’s dovish comments on Tuesday, saying that policymakers have not ruled out the possibility of using negative interest rates. On the economic data front, the UK Q2 GDP print was revised higher to -19.8% from -20.4% estimated previously, albeit did little to impress the GBP bulls.

However, the recent optimism over a Brexit deal extended some support to the major and helped limit any deeper losses. Hopes of Brexit deal were further lifted by reports that both sides had been able to engage more closely on the contentious issues of fishing opportunities and state aid. The pair managed to find decent support near the 1.2800 mark after the BoE’s chief economist, Andy Haldane downplayed expectations of negative rates in the short-term. Haldane further added that any decision on negative rates is likely to take months and would depend on cost-benefit analysis. This, coupled with a turnaround in the equity markets, pushed the pair back above the 1.2900 mark.

The global risk sentiment got a strong boost from upbeat US macro data and renewed hopes for the US fiscal stimulus. the ADP reported that private-sector employment grew by 749K in September as against 650K expected. Separately, the final GDP report showed that the economy contracted by 31.4% annualized pace during the second quarter of 2020 vs. -31.7% estimated. Adding to this, Chicago PMI jumped to the highest level since the end of 2018 and came in at 62.4 in September, reflecting the resilience of the broader US economy. Adding to this, The US Treasury Secretary Steven Mnuchin told reporters that talks with House Speaker Nancy Pelosi made a lot of progress on long-awaited COVID-19 relief legislation.

The pair rallied around 140 pips from daily swing lows and edged higher for the fourth consecutive session on Thursday. The momentum lifted the pair to near two-week tops during the Asian session as investors now look forward to the final UK Manufacturing PMI for some impetus. Later during the early North American session, the US macro data will influence the USD price dynamics and contribute to produce some meaningful trading opportunities. Thursday’s US economic docket highlights the release of features the release of Initial Weekly Jobless Claims, core PCE Price Index and the ISM Manufacturing PMI. Apart from this, the incoming Brexit-related headlines and developments over the next round of the US fiscal stimulus could infuse some volatility.

From a technical perspective, the pair has already confirmed a near-term bullish breakthrough a three-week-old descending trend channel and seems poised to climb further. The ongoing positive momentum might now assist the pair to make a fresh attempt to conquer the key 1.3000 psychological mark. The mentioned level coincides with the 50% Fibonacci level of the 1.3482-1.2676 recent pullback, which if cleared decisively will set the stage for additional gains. The pair might then aim to reclaim the 1.3100 mark before extending the momentum towards the 61.8% Fibo. level, around the 1.3160-70 region.

On the flip side, pullbacks from higher levels might now find some support near the 1.2900 mark. Any subsequent fall might be seen as a buying opportunity and remain limited near the 23.6% Fibo. level, around the 1.2870-65 region. That said, a sustained breakthrough might turn the pair vulnerable to retest the overnight swing lows, around the 1.2800 mark. Some follow-through selling should pave the way for a move back towards challenging the very important 200-day SMA, en-route the 1.2700 mark and multi-week lows around the 1.2675 region.