25-Nov-2020

1) AUD/USD Buoyed As Risk Sentiment Surges Following Trump Commitment To Transition Of Power
2) Dollar Ends Lower On Return Of Risk Sentiment As US Stocks Rise To Record Highs
3) EUR/USD: Bulls Trying To Seize Control, Sustained Move Beyond 1.1920 Awaited
4) GBP/USD: Upside Remains Capped Near Ascending Channel Resistance
5) XAU/USD: Gold Risks Further Falls Below 200-DMA

 

 

1) AUD/USD Buoyed As Risk Sentiment Surges Following Trump Commitment To Transition Of Power

The Australian dollar broke resistance overnight, extending through 0.7330 to mark fresh highs at 0.7367. Risk sentiment surged after President Trump acknowledged that the transition to a Biden Presidency should begin. While Trump stopped short of conceding and assured supporters the campaign would continue to challenge the election result the commitment to a peaceful transition of power at least removed another risk barrier. Further support came following reports Former Fed Chair Janet Yellen will be named Biden’s Treasury Secretary. Yellen has publicly called for increased government stimulus to support the economy through the pandemic and her appointment brings with it, an expectation for a larger spending plan.

Having struggled to break above 0.7340 the overnight rally and shift in risk narrative opens the door for the AUD to extend toward September highs at 0.74. With focus turning away from short term headwinds as optimism for a vaccine led recovery in 2021 increases there is ample scope for the AUD to capitalize on further USD weakness into the end of the year.

The US dollar, Japanese Yen, and Swiss franc all shifted lower overnight as risk sentiment surged and the narrative shifted away from short term headwinds after President Trump acknowledged the head of the General Services Administration should begin the transition to a Biden led government. While the President assured supporters they will continue to challenge the election result the removal of the threat of a hostile transition of power eliminates another risk barrier weighing on currency markets. The dollar index fell three-tenths of a percent and closed in on Monday’s three-month low at 92.013. With key technical supports at 92 still intact another surge in risk sentiment and a break below this threshold could open the door to further declines and an extension in the downward shift.

With the Euro and GBP enjoying gains on the back of broader USD weakness attentions remain affixed to the ongoing risk narrative. With Brexit negotiations expected to yield at least a partial trade agreement as early as Friday, another risk barrier could well be removed in the coming days opening the door for another assault on 1.20 for the Euro and a break above 1.34/35 for Sterling.

 

2) Dollar Ends Lower On Return Of Risk Sentiment As US Stocks Rise To Record Highs

The greenback ended the day lower against the majority of its peers, except versus the Japanese yen on Tuesday on the return of risk appetite due to optimism that Covid-19 vaccines will be rolled out soon together with U.S. President Donald Trump’s acceptance of the transition to a Joe Biden presidency as well as the Dow Jones and S&P closed at record highs. (Dow ended the day at 30,046 up by 454 points or 1.54%).

On the data front, Reuters reported U.S. consumer confidence fell more than expected in November likely as a widespread surge in new COVID-19 infections and business restrictions outweighed encouraging news on vaccines. The Conference Board’s consumer confidence index dropped to a reading of 96.1 this month from 101.4 in October. Economists polled by Reuters had forecast the index falling to a reading of 98 in November. The index was at 132.6 in February.

Versus the Japanese yen, the dollar extended Monday’s winning streak and gained to 104.64 at Asian open due to an overnight rally in U.S. stocks. However, lack of follow-through buying triggered profit-taking and the price tumbled to session lows at 104.15 in the European morning. The pair then erased intra-day losses and rallied to 104.75 in New York morning before weakening again to 104.43 near the close on renewed USD’s weakness.

The single currency traded with a firm bias in Asia and jumped in early European morning due to the rise in European bourses and gained to 1.1893 in Europe on the return of risk sentiment. However, price then pared intra-day gains and retreated to 1.1842 in New York due to USD’s rebound but only to rise again to 1.1896 near the close as the Dow and S&P closed at record highs.

Reuters reported the European Central Bank should consider copying the U.S. Federal Reserve’s new inflation target and aim to make up for lost price growth after undershooting its aim, Finnish policymaker Olli Rehn said on Tuesday. Rehn praised this strategy and argued that the ECB needed to make it’s own “below but close to 2%” target genuinely symmetric and clarify that it would be sufficiently forceful if price growth deviates from its target in either direction.

The British pound also traded with a firm bias in Asia and jumped to session highs at 1.3380 in the European morning on the return of risk sentiment. However, the price then dropped to 1.3294 in New York due to a broad-based rebound in USD but only to rebound strongly to 1.33604 on rising in U.S. stocks.

 

3) EUR/USD: Bulls Trying To Seize Control, Sustained Move Beyond 1.1920 Awaited

Following the overnight intraday volatile swings, the EUR/USD pair regained positive traction on Tuesday and was supported by the emergence of some fresh selling around the US dollar. The global risk sentiment remained well supported by the latest optimism over the progress toward remedies for the highly contagious coronavirus disease. Meanwhile, the formal start of US president-elect Joe Biden’s transition to the White House cleared the uncertainty on the US political front. This, along with reports that former Fed Chair Janet Yellen could become the next US Treasury Secretary, further boosted investor’s confidence. This, in turn, triggered a strong rally in the equity markets, which weighed heavily on the greenback’s safe-haven status and provided a goodish lift to the major.

On the other hand, the shared currency was supported by Tuesday’s better-than-expected German economic data. The final version of the German GDP report showed that the economy expanded 8.5% QoQ during the third quarter of 2020 as compared to 8.2% estimated earlier. Separately, the German IFO Business Climate Index matched consensus estimates and dropped to 90.7 in November from 92.5 previous. The Current Assessment Index eased to 90 during the reported month as against a fall to 87.2 anticipated and helped offset the slightly disappointing IFO Expectations Index, which came in at 91.5 for the reported month. From the US, the Conference Board Consumer Confidence dropped notably to 96.1 in November from 101.4 in the previous month and did little to provide any respite to the USD bulls.

The pair finally settled near the top end of its daily trading range and continued scaling higher through the Asian session on Wednesday. Bulls were seen making a fresh attempt to build on the momentum beyond the 1.1900 mark amid the prevalent upbeat market mood. There isn’t any major economic data due for release from the Eurozone, leaving the pair at the mercy of the broader market risk sentiment. Later during the early North American session, a flurry of top-tier US macro data will influence the USD price dynamics and produce some meaningful trading opportunities. The US economic docket highlights the release of the preliminary (second estimate) US GDP report, Durable Goods Orders, Initial Weekly Jobless Claims and final Michigan Consumer Sentiment Index for November.

The key focus, however, will be on the release of the latest FOMC meeting minutes, which will be scrutinized for the possibility of any further policy easing by the Fed in December. The Fed’s policy outlook will play a key role in influencing the near-term USD price dynamics and assist investors to determine the next leg of a directional move for the major.

From a technical perspective, nothing seems to have changed much for the pair. Bulls might still need to wait for some follow-through strength beyond monthly swing highs, around the 1.1920 region, before positioning for any further near-term appreciating move. Above the mentioned hurdle, the pair is likely to aim back to reclaim the key 1.2000 psychological mark. A subsequent breakthrough YTD top, around the 1.2010 region, should pave the way for an extension of the upward trajectory. The momentum could then push the pair towards the 1.2065-75 intermediate resistance en-route the 1.2100 round-figure mark.

On the flip side, immediate support is pegged near the 1.1855-50 region, below which the pair could slide back towards weekly lows, around the 1.1800 mark. Some follow-through selling could turn the pair vulnerable to accelerate the fall towards the 1.1750-45 support zone before eventually dropping to the 1.1700 mark. The downward trajectory could further force the pair to test the 1.1625 support ahead of the 1.1600 level.

 

4) GBP/USD: Upside Remains Capped Near Ascending Channel Resistance

The GBP/USD pair had some good two-way price swings on Tuesday and finally settled in the green for the third consecutive session, albeit remained below twelve-week tops set in the previous day. In the absence of fresh Brexit updates, the lack of progress on three sticking points – the so-called level playing field, fisheries, and state-aid rules – prompted some intraday selling around the major. However, investors remained optimistic about the possibility of a last-minute Brexit trade deal, which, in turn, continued extending some support to the British pound. Apart from this, the emergence of some fresh selling around the US dollar further contributed to the pair’s overnight uptick.

The greenback remained depressed on the back of the prevalent risk-on environment amid the progress toward remedies for the highly contagious coronavirus disease. Meanwhile, the formal start of US president-elect Joe Biden’s transition to the White House cleared the uncertainty on the US political front. This, along with reports that the former Fed Chair Janet Yellen could become the next US Treasury Secretary, provided an additional boost to the already upbeat market mood. The USD bulls failed to gain any respite from Tuesday’s disappointing release of the Conference Board’s Consumer Confidence Index, which dropped notably to 96.1 in November from 101.4 in the previous month.

Despite the supporting factors, the pair lacked any strong bullish conviction and the upside remained capped below the 1.3400 round-figure mark. The pair was seen hovering in a narrow trading band around mid-1.3300s through the Asian session on Wednesday. There isn’t any major market-moving economic data due for release from the UK and British finance minister Rishi Sunak is due to deliver a one-year Spending Review to the parliament at around 1230 GMT. Apart from this, the incoming Brexit-related headlines will influence the sterling and produce some trading opportunities. Later during the US session, a slew of top-tier US macro data, followed by the FOMC meeting minutes will determine the next leg of a directional move for the greenback and provide some meaningful impetus.

From a technical perspective, the pair has been struggling to make it through a resistance marked by the top end of a two-month-old ascending trend-channel. That said, the emergence of some dip-buying on Tuesday still favours bullish traders. However, it will be prudent to wait for some follow-through buying above the mentioned barrier, currently near the 1.3400 mark, before positioning for any further appreciating move. A sustained breakthrough will be seen as a fresh trigger for bullish traders and push the pair further towards September monthly swing highs, around the 1.3480 region, en-route the key 1.3500 psychological mark.

On the flip side, the 1.3300 round-figure mark might continue to act as immediate strong support. Any subsequent fall might still be seen as a buying opportunity and remain limited near the 1.3260 horizontal support. Failure to defend the mentioned support levels might prompt some technical selling and turn the pair vulnerable to slide back towards the 1.3200 round-figure mark. The corrective slide could further get extended to the 1.3160 region before the pair eventually drops to test the next major support near the 1.3110-05 zone.

 

5) XAU/USD: Gold Risks Further Falls Below 200-DMA

Gold (XAU/USD) is holding onto the critical $1800 support so far this Wednesday. The yellow metal is set to extend the bearish momentum, in response to the shift in the market’s perception towards the riskier assets. Attention turns towards a batch of critical US economic data and FOMC minutes due on the cards later in the day for fresh cues.

The underlying theme hinges on the expectations of a quicker global economic recovery from the pandemic blow, thanks to rapid development in the coronavirus vaccines on both sides of the Atlantic. Meanwhile, strong US Markit Manufacturing and Services PMIs released earlier this week added credence to the upbeat outlook on the economic rebound, which calls for lower demand for additional monetary and fiscal stimulus, eventually exacerbating the pain in the precious metal.

Markets also cheer the easing US political uncertainty after President-elect Joe Biden kicked-off his White Transition and put at rest the odds of a contested election. The Wall Street stocks rallied to record highs on the dual optimism and downed the demand for the non-yielding gold.

Looking at the daily chart, the price stalls its recovery and turns south once again, although it holds well above the critical 200-daily moving average (DMA) support at $1798.

The 14-day Relative Strength Index (RSI) trends in the bearish region but not oversold yet, suggesting that there is more room to the downside. Acceptance below the 200-DMA support could trigger a sharp drop towards the May 18 high of $1765.

Meanwhile, the bearish bias remains intact so long as the metal stays below the fierce support now resistance at $1850

Gold has confirmed a bear flag breakdown on the hourly sticks earlier in the Asian session. The price now attempts a bounce along with the hourly Relative Strength Index (RSI).

But the bulls are likely to face stiff resistance at the confluence of the pattern support and bearish 21-hourly moving average (HMA) at $1808. Further up, the pattern resistance at $1814 could be challenged.

To the downside, sellers will aim for the measured target at $1777 on a breach of the crucial support around $1800-$1798 levels.