23-Oct-2020

1) EUR/USD: 1.1765-60 Support Holds The Key For Bulls, Eurozone PMIS Eyed For Fresh Impetus
2) Wall Street Ends Higher On Thursday But Futures Retreat After Trump-Biden Debate
3) GBP/USD Moving Into Technical Resistance As Brexit Talks Resumes

1) EUR/USD: 1.1765-60 Support Holds The Key For Bulls, Eurozone PMIS Eyed For Fresh Impetus

The EUR/USD pair witnessed some selling on Thursday and snapped four consecutive days of the winning streak amid resurgent US dollar demand. The global risk sentiment dampened on the back of fading hopes about a pre-election US fiscal package, which, in turn, provided a modest lift to the greenback’s safe-haven status.

Meanwhile, House of Representatives Speaker Nancy Pelosi said that stimulus talks were on a good path and they will soon be ready to put pen to paper on the stimulus bill. Pelosi further added that the aid bill could be passed in the House before the election day. Investors, however, seemed unconvinced that the bill could actually pass through the Senate amid strong opposition from Republicans over a bigger stimulus bill.

On the other hand, the shared currency was weighed down by disappointing Eurozone economic data. In fact, the German Gfk Consumer Climate for November slipped to -3.1 from the previous month’s reading of -1.7, missing consensus estimates pointing to a reading of -2.8%. Moreover, the Eurozone Consumer Confidence Index also fell short of market expectations and dropped to -15.5 from -13.9 previously. This comes on the back of the second wave of coronavirus infections, which strengthened the case for additional monetary easing by the European Central Bank and took its toll on the common currency.

Data released from the US showed that Initial Weekly Jobless Claims fell to 787K during the week ended October 16, well below the 860K anticipated. Adding to this, the previous week’s reading was also revised lower to 842K from 898K reported earlier. Separately, the US Existing Home Sales recorded a stronger-than-expected growth of 9.4% in September and remained supportive of the strong bid tone surrounding the USD.

The pair extended its retracement from five-week tops touched earlier this week and remained depressed through the Asian session on Friday. Market participants now look forward to the release of the flash version of the Eurozone PMI prints, which will play a key role in driving the sentiment surrounding the shared currency. Later during the early North American session, the release of the flash US Manufacturing/Services PMI will also be looked upon for some trading impetus on the last day of the week.

From a technical perspective, the corrective slide dragged the pair towards an important confluence resistance breakpoint, now turned support near the 1.1790-85 region. Any subsequent weakness is more likely to find decent support near the 1.1765-60 horizontal zone. Failure to defend the latter might negate any near-term bullish bias and turn the pair vulnerable to accelerate the fall back towards the 1.1700 marks. The downward trajectory could further get extended towards testing September monthly swing lows, around the 1.1615-10 region.

On the flip side, attempted positive moves might now confront a stiff resistance near the 1.1855-60 region. The mentioned barrier marks the 61.8% Fibonacci level of the 1.2011-1.1612 downfall. A sustained move beyond the 1.1880-90 congestion zone will be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent appreciating move, possibly towards reclaiming the key 1.2000 psychological marks.

2) Wall Street Ends Higher On Thursday But Futures Retreat After Trump-Biden Debate

US shares closed higher on Thursday on hopes that the next stimulus package would be voted soon and would support the economy hit by the pandemic.

US House Speaker Nancy Pelosi said during her weekly news conference that there was visible progress in talks with the Trump administration and that she and Treasury Secretary Steven Mnuchin were “just about there” in their negotiations. However, she admitted that the new relief package might come after the election.

Meanwhile, White House economic adviser Larry Kudlow warned that there were “significant policy differences” that were hardly resolvable before the election.

Pelosi and Mnuchin are negotiating a stimulus package worth about $2 trillion, which for Republicans is higher than they would have admitted given the budget deficit.

Elsewhere, the Labor Department said that the jobless claims fell last week more than expected to 787,000, though they maintain at a high level given that stimulus support has vanished.

Also, the National Association of Realtors said that US home sales jumped to a 14-year high last month, driven by low mortgage rates. Existing homes sales surged 9.4% to an annual rate of 6.54 million units in September, the highest since May 2006. Analysts expected an increase of 5% to 6.30 million units.

The economic updates and stimulus hopes have supported the three benchmark indexes, with the S&P 500 gaining 0.52%. Energy and financials were the best performers. The Dow added 0.54%, and Nasdaq rose 0.19%.

Still, US stock futures are now declining after the debate between Trump and Democratic candidate Joe Biden. The debate was more civilized this time but still contentious.

In individual corporate news, Gilead Sciences rose over 3% in after-hours trading after the US Food and Drug Administration green-lighted its antiviral drug remdesivir, which is used to treat COVID-19. Meanwhile, Moderna said it had concluded the enrollment of 30,000 volunteers in its late-stage trial of a coronavirus vaccine.

Intel shares slumped 10% in extended trading even as the company reported Q3 earnings that beat expectations. Investors reacted to the unexpected weakness in its data center business.

In Asia, stocks are mixed in early trading on Friday, as investors discuss the Trump-Biden debate and evaluate the optimism surrounding the US stimulus and COVID vaccines and treatment.

At the time of writing, China’s Shanghai Composite is down 0.75%, and the Shenzhen Component has tumbled 1.19%. Both indices opened higher.

Japan’s Nikkei 225 is up 0.25%. Japan’s key consumer prices indicator declined at a slower pace last month but still showed a drop for a sixth consecutive month.

South Korea’s KOSPI has gained 0.25%, and Hong Kong’s Hang Seng is up 0.07%.

In Australia, the ASX 200 closed 0.11% lower.

European stocks will be mixed on Friday, but bears will likely dominate judging by the index futures.

In the commodity market, oil prices gained from the comments made by Russian President Vladimir Putin, who expressed his readiness to extend record production cuts in the wake of the pandemic. However, crude prices gave up their recent gains amid fears that the second wave would hurt demand. Both WTI and Brent have lost about 0.50% as of now. Prices are set to end the week slightly lower.

Gold is bullish despite a stronger greenback, as investors reacted to the latest debate between Trump and Biden, and amid the stimulus talks progress. The metal is up 0.04% to $1,905. Earlier today, Refinitiv Metals Research said that demand for gold from jewelers and central banks would remain lower next year compared to the pre-COVID period. Nevertheless, demand would be driven by investors who will hoard record amounts of bullion. The high prices of gold and the lockdowns have crashed the sales of jewelry in Asia, which was the biggest driver of the gold market.

In FX, the US dollar is ascending, recovering part of previous losses. The USD Index rose 0.13% to 93.082. Still, the greenback is set to end the week much lower after slumping on stimulus hopes.

EUR/USD is down 0.17% to 1.1795. However, USD/JPY is down 0.12% to 104.60, as the yen is attracting more investors amid the expected turbulent trade before the election.

The British pound is correcting after surging on Brexit optimism. GBP is down against both the USD and the euro. Meanwhile, British consumer sentiment fell in October by the most since the lockdown was introduced in March.

3) GBP/USD Moving Into Technical Resistance As Brexit Talks Resumes

Despite no deal yet, cable was higher earlier this week as USD moved down across the board, but investors quickly realized that there is an unclear situation about the BREXIT.  EU-UK negotiations are ready to continue but GBPUSD is coming down anyway, and this is happening from a very interesting technical resistance zone.  From an Elliott Wave perspective, we see the pair making a three-wave rise from the September low, which is seen as a corrective recovery against the sharp September drop. It’s a temporary retracement waiting on a market catalyst for more potential sellers to show up that may try to bring the price lower. But like always I love to wait on a market confirmation before I may call the end of a rally, before I may look for a short idea. With that said, I want to see a drop back towards 1.2900 in an impulsive fashion to make sure that bears are back in control.  The invalidation level, for now, remains at 1.3480, while the resistance zone stands at 1.3150-1.3250.