26-Nov-2020

1) AUD/USD Steady Despite A More Cautious Appetite For Risk
2) GBP/USD: Bulls Wait for A Sustained Move Beyond Ascending Channel Hurdle
3) EUR/USD: 1.2000/YTD Top Seems To Be The Next Relevant Bullish Target
4) XAU/USD: Gold Bearish Exhaustion Or Selling Opportunity In XAU/USD?

1) AUD/USD Steady Despite A More Cautious Appetite For Risk

Currency movements were modest through trade on Wednesday, allowing the AUD to sustain Tuesday’s uptick and hold onto gains above 0.7330. While demand for risk stalled, softer than anticipated US data sets, led by a surge in jobless claims, forced the world’s base currency lower, propping up the AUD as investors prepared positions leading into the Thanksgiving long weekend. The AUD bounced between 0.7325 and 0.7375 seemingly unable to break the final resistance handle ahead of 0.74 and 0.75. Having broken above 0.7330 earlier this week resistance appears to have formed support, at least in the short term, with intraday troughs approaching this handle prompting buying. The risk narrative continues to drive direction as long-term optimism begins to outweigh near-term headwinds. While there is still a risk a shift in sentiment could prompt a swift correction, we see ample scope for the AUD to continue to mark higher highs through the coming weeks.

The US dollar edged nearer 3-month lows on Wednesday, despite Tuesday’s risk on the rally running out of steam. Jobless claims increased last week as the near-term impacts of the COVID-19 pandemic weigh on the US economy. The virus continues to spread across the US with little signs of slowing down, forcing states and local governments to re-introduce social distancing restrictions. While consumer spending and business investment enjoyed strong gains through October, the worsening pandemic offers little hope a Q4 retracement will be avoided. AS investors prepare positions for the Thanksgiving Holiday weekend our attentions turn to the FOMC meeting minutes. Earlier this month the Fed discussed using bond and asset purchases to drive activity and support the economy through the pandemic, and we will be looking to the minutes for further guidance and any signal looser monetary policy may be introduced. More accommodating conditions will weigh further on the USD as investors look to equities and risk assets for a higher yield return.

Sterling made another bid to break above 1.34 falling short at 1.3390 while the Euro pushed back through 1.19 to touch new highs at 1.1930. With optimism a trade deal between the UK and EU could be announced before the end of the month, there is scope for both currency to enjoy further upside, with a breakdown in negotiations prompting a swift and steep correction. Our attentions today remain on COVID-19 and Brexit headlines for short term direction.

2) GBP/USD: Bulls Wait for A Sustained Move Beyond Ascending Channel Hurdle

The GBP/USD pair continued with its two-way price moves on Wednesday and was influenced by a combination of diverging factors. The British pound witnessed some intraday selling after the European Commission president, Ursula van der Leyden warned that a Brexit deal is far from certain and added that the disagreement over access to Britain’s fishing waters continues to block progress. Von der Leyen also said that there had been genuine progress in Brexit talks but not enough to produce a significant breakthrough on key sticking points, including state-aid rules.

Separately, British Prime Minister Boris Johnson reiterated that the UK’s position on fisheries hasn’t changed and that they will not ask for additional time to negotiate the trade deal with the European Union. With very little time left before the Brexit transition periods end on December 31, the not so optimistic Brexit headlines took its toll on the sterling. Despite the negative factor, the pair managed to attract some dip-buying near the 1.3300 mark and the subsequent rebound suggests that investors remain optimistic about the possibility of a last-minute Brexit deal.

Apart from this, persistent selling around the US dollar assisted the pair to climb back closer to the 1.3400 mark. Optimism over the development of a COVID-19 vaccine and clarity on the US political front continued undermining the greenback’s relative safe-haven status. The USD bearish pressure remained unabated following the release of a rather unimpressive US macro data. The revised version of the US GDP print matched original estimates and showed that the economy expanded by 33.1% annualized pace during the third quarter of 2020 as compared to market expectations for a 33.2% growth.

Meanwhile, the headline US Durable Goods Orders rose by 1.3% in October, and orders excluding transportation also increased by 1.3%, both surpassing consensus estimates. The positive figures, to a larger extent, were negated by an unexpected jump in the Initial Weekly Jobless Claims. In fact, the number of Americans filing for unemployment insurance jumped to 778K for the week ended November 20. The latter indicated that the imposition of new COVID-19 restrictions was undermining the labor market recovery and added to worries about the potential economic fallout from rising coronavirus cases.

Finally, the minutes of the November 4-5 FOMC meeting revealed that policymakers debated a range of options on bond purchases to support the economic recovery. The minutes, however, did little to provide any meaningful impetus. The pair finally settled with modest daily gains and edged higher for the fifth consecutive session on Thursday. In the absence of any major market-moving economic releases and liquidity is expected to remain thin on the back of the Thanksgiving holiday in the US. Hence, investors will keep a close eye on fresh Brexit updates, which should continue to play a key role in influencing the sentiment surrounding the pound.

From a technical perspective, nothing seems to have changed much for the pair. Bulls might still need to wait for a sustained move beyond the 1.3400 mark – a two-month-old ascending trend-channel resistance – before placing fresh bets. Above the mentioned barrier, the pair is likely to accelerate the positive move 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 mark now seems to have emerged as immediate strong support. Any subsequent fall might 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 further towards the 1.3200 area. 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.

3) EUR/USD: 1.2000/YTD Top Seems To Be The Next Relevant Bullish Target

The EUR/USD pair added to the previous day’s positive move and gained some follow-through traction on Wednesday amid persistent selling pressure surrounding the US dollar. Optimism over the development of a COVID-19 vaccine, along with clarity on the US political front continued weighing on the greenback’s relative safe-haven status and was seen as one of the key factors driving the pair higher. It is worth recalling that President-elect Joe Biden was formally given a go-ahead to begin his transition to the White House. The USD remained depressed and fell to nearly three-month lows in reaction to mixed US economic releases.

The prelim US GDP report showed that the economic growth stood at 33.1% annualized pace during the third quarter of 2020. The reading matched advance estimates but was slightly lower than market expectations of 33.2%. Separately, the headline US Durable Goods Orders rose by 1.3% in October, and orders excluding transportation also increased by 1.3%, both surpassing consensus estimates. The positive figures, to a larger extent, were negated by an unexpected jump in the Initial Weekly Jobless Claims. In fact, the number of Americans filing for unemployment insurance jumped to 778K for the week ended November 20.

The data suggested that the imposition of new COVID-19 restrictions was boosting layoffs and undermining the labor market recovery. This, in turn, added to market worries about the potential economic fallout from the continuous surge in new coronavirus cases. Finally, the Michigan Consumer Confidence Index was revised lower to 76.9 for November and kept the USD bulls on the defensive. Meanwhile, the minutes of the 4-5 November FOMC meeting did little to influence or provide any meaningful impetus to the major. The minutes revealed that policymakers debated a range of options on bond purchases to support the economic recovery.

Despite the supporting factors, the pair trimmed a part of its intraday gains to the highest level since early September but managed to end the day above the 1.1900 mark. The pair maintained its bid tone for the third consecutive session on Thursday and held steady around the 1.1925-30 region through the Asian session. Market participants now look forward to the release of the German GfK Consumer Climate Index for a fresh impetus. That said relatively thin liquidity conditions on the back of the Thanksgiving holiday in the US might hold traders from placing aggressive bets and lead to a subdued/range-bound price action.

From a technical perspective, a move beyond the previous monthly swing highs resistance near the 1.1920 region might have already set the stage for a move towards reclaiming the key 1.2000 psychological mark. This is closely followed by YTD tops, around the 1.2010 region, above which the upward trajectory has the potential to push the pair further towards the 1.2065-75 intermediate resistance en-route the 1.2100 mark.

On the flip side, the 1.1880 region now seems to protect the immediate downside and any subsequent dip might now be seen as a buying opportunity. This, in turn, should help limit the downside near the 1.1855-50 region. That said, failure to defend the mentioned support levels might prompt some technical selling and accelerate the slide towards the 1.1800 mark. The corrective slide could further get extended towards the 1.1750-45 support zone, which if broken decisively might negate any near-term bullish bias. The pair might then turn vulnerable to weaken further below the 1.1700 mark, towards testing the 1.1625 intermediate support en-route the 1.1600 mark.

4) XAU/USD: Gold Bearish Exhaustion Or Selling Opportunity In XAU/USD?

Gold (XAU/USD) attempted a tepid recovery from near four-month troughs on Wednesday but faced rejection at higher levels and finished the day almost unchanged around $1807. Gold’s recovery was led by the broad US dollar’s weakness amid the resurgence of fears over the economic growth after the weekly jobless claims suggested a jump in layoffs. The continued escalation in the virus infections and the renewed restrictions seemed to threaten the economic recovery. Meanwhile, the FOMC minutes showed that the Fed remains ready to do more in December, which weighed further on the greenback.

The sellers lurked and dragged the metal lower into the close, as the vaccine narrative continued to prevail even though the focus shifted to the economic indicators. Going forward, a lack of relevant macro news and holiday-thinned light trading could keep the investors on the sidelines, although some exaggeration in the moves cannot be ruled.

Gold is not out of the woods, although signs of exhaustion seen on the daily chart. Bears are likely to see any bounce in the spot as a good selling opportunity following a big breakthrough the critical $1850 support earlier this week.

At the time of writing, gold remains within a familiar trading range, lacking a clear directional bias, as indicated by Wednesday’s doji candle. However, the risks remain skewed to the downside, with the $1800 level still in danger. The selling momentum could accelerate on a break below the 200-daily moving average (DMA) at $1798, opening floors towards the May 18 high of $1765.

On the flip side, Wednesday’s high of $1818 needs to be taken out for the recovery to gain traction.