13-Oct-2020

1) EUR/USD: Resistance Emerges In The 1.1830 Region
2) GBP/USD Remains Pressured Around 1.3050 Amid Mixed UK Jobs Data
3) AUD Upturn Falters As Pboc Intervenes To Correct CNY Appreciation

1) EUR/USD: Resistance Emerges In The 1.1830 Region

Following recent 2-week highs in the 1.1830 region at the end of last week, EUR/USD has so far embarked on a corrective downside that met contention in the 1.1790 zone for the time being, where is located the 55-day SMA.

Activity around the single currency remains contained and within a broad-based cautious note ahead of the EU Summit on Thursday and Friday. In addition, market chatter on extra US fiscal stimulus appears to be dying off, while the unremitting advance of the coronavirus pandemic puts the economic recovery to the test, all weighing down on the euro.

In the immediate docket, the German/EMU ZEW survey is due later in the European morning and is expected to shed further light over the morale of market participants regarding the economic rebound in the region.

The continuation of the corrective downside in EUR/USD carries the potential to extend further and re-visit the 1.1700 neighbourhood, where coincide the immediate support line (off 2020 high) and a Fibo level (of the 2017-2018 rally). The surpass of recent tops in the 1.1830 zone should open the door to extra gains to, initially, the 1.1917 level (September 10) ahead of 1.1965 (August 18). A move to the 2020 high just beyond 1.2000 the figure is seen unlikely for the time being at least.

2) GBP/USD Remains Pressured Around 1.3050 Amid Mixed UK Jobs Data

GBP/USD keeps the offered tone intact at around 1.3050 after the UK jobs report showed mixed results. The US dollar’s recovery amid the risk-off mood, courtesy of Johnson & Johnson’s coronavirus vaccine trial pause, adds to the weight on the spot.

Technically, GBP/USD takes a U-turn from the 50% Fibonacci retracement level of the September month’s downside, which in turn suggests further weakness to come. Though, the 1.3000 round-figure and a joint of 200-bar SMA and 38.2% Fibonacci retracement level near 1.2985 will challenge the bears during the pair’s further weakness. Alternatively, an upside clearance of 50% Fibonacci retracement level near 1.3080 will find it difficult to cross the mentioned channel’s upper line, currently around 1.3105, during the additional rise.

Early Tuesday, the UK’s Office for National Statistics (ONS) will release the September month Claimant Count figures together with the Unemployment Rate in the three months to July at 06:00 AM GMT. Although Brexit, coronavirus (COVID-19) and stimulus headlines are likely to keep the driver’s seat, the recent doubts over whether the return of activities contributed to the employment highlight importance of today’s employment day for GBP/USD traders.

The UK labor market report is expected to show that the average weekly earnings, including bonuses, in the three months to August, to ease from the previous -1.0% to -05%, while ex-bonuses, the wages are seen improving from 0.2% to 0.6% during the state period.

The number of people seeking jobless benefits, namely the Claimant Count Change, is expected to increase from 73.7K previous to 78.8K in September. Further, the ILO unemployment rate is expected to pick up from 4.1% to 4.3% during the three months ending in August.

3) AUD Upturn Falters As Pboc Intervenes To Correct CNY Appreciation

The Australian dollar failed to maintain the momentum enjoyed into the close last week, edging lower through trade on Monday despite a largely positive risk narrative and an uptick in equities and risk assets. The Australian dollar failed to follow stocks higher as the ASX, S&P500 and Nasdaq all enjoyed strong gains, instead intervention from the Peoples Bank of China to correct the recent Yuan appreciation spilled over into AUD demand forcing the Aussie dollar back toward 0.72 US cents. The PBoC removed minimum cash requirement regulations on Forwards at the weekend while marking the daily reference rate 1% lower than Friday’s fix. Often seen as a proxy to the Yuan the AUD was forced lower giving up 0.7235 to touch intraday lows at 0.7204.

With little of note on the domestic docket today, attentions turn to Thursday’s employment report. Unemployment is expected to push beyond 7% despite the efforts of Jobkeeper. A poor print will likely add mounting pressure on a November RBA rate cut. With many now pricing in a 15 basis point reduction in official interest rate, headline domestic data points are key in firming expectations through the coming weeks. We anticipate the AUD will remain largely range bound bouncing between 0.7020 and .7230 with broader topside resistance at 0.74 intact through the rest of the year.

The Great British Pound continued its push beyond 1.30, buoyed by the implementations of COVID 19 restrictions that have been perceived to be lighter than first anticipated. AS the UK battels to control a 2nd wave of infections Boris Johnson announced new social distancing restrictions where-in the fight against coronavirus will now be regionalised. A targeted approach is seen as preferable toa full scale national lockdown amid hopes the engine driving the economy can keep running. Sterling touched intraday highs at 1.3080 as attentions now turn to UK-EU trade talks. European leaders will be attending EU summit talks with clear goal of reaching at least some form of trade agreement. The self-imposed deadline for a Brexit trade package has arrived and failure to put aside key differences this week could prompt a rapid and sharp GBP correction.

The US dollar traded nearer the three week low when measured against a basket of currencies, unable to recoup Friday’s correction as hopes a Stimulus package designed to ease the burden of the COVID19 pandemic were bolstered. Friday’s depreciation marked the biggest daily decline in almost 6 weeks as demand for risk improved amid expectations the lawmakers will pass at least basic COVID19 relief measures while the Presidential election is unlikely to be close enough for Trump and the republicans to contest. Concerns the White House would enter a long and protracted protest through the supreme courts system should the election result in a narrow Biden win have eased as polls show Biden has widened his advantage on the incumbent. That said Trump is still polling well in key battleground states and the race is far from over.