DXY broke above the consolidation zone last week, making a fresh high since August. It was mostly benefited from the risk-off sentiment caused by Europe’s second wave of Covid-19 and uncertainty of US presidential election.
There was Congress testimony by both Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin last week. The two top U.S. economic officials mentioned that US economy is picking up from the depression, but employment and overall economic activity are still far below the pre-pandemic levels and there will be significant uncertainty. Powell also emphasized that the Fed will continue to do everything to alleviate the economic fallout. Moreover, $259 billion is left from the $2.2 trillion relief measure Congress approved in March, but Mnuchin said he didn’t see a need to use the fund.
Additionally, the market has expected the US will not launch any economic relief package before the election. However, House Democrats are preparing a new $2.4 trillion stimulus plan and Speaker Nancy Pelosi aims to restart negotiations with the White House.
Euro experienced the worst full week of recent two trading months. It broke below the strong support at 1.1690 interval and has reached a lower low at 1.1626. The selling pressure built possibly attributed to the profit taking of long positions.
The Euro Zone September PMI was announced last Wednesday. Although the manufacturing sector performed stably, the downturn for services was unexpectedly huge, dropping from 50.5 to 47.6. The overall PMI went down to 50.1, revealing the business growth halts as services reverse.
However, according to the CME COT report on Tuesday (22th September), the Euro futures’ net speculative position expanded from less than 180,000 to 190,822, indicating the selling pressure within recent days may be temporary.
The market is waiting for the first Presidential Debate held on Tuesday, 29 September (Eastern Time, GMT-4). According to the major polls, the Biden has been ahead of Donald Trump and hovered around 50%.
Based on historic statistics, there is no clear correlation between the election and financial markets. However, some analysts anticipated that if Trump cannot gain more support after the debate, the market will be more risk-adverse as it is worried that Trump will provoke dispute with China or he will refuse to have a peaceful transfer.
September Nonfarm Payrolls and PMI will also be released next week. The consensuses are 875,000 increase and 56 respectively.
It has been a rough week for the AUDUSD as it fell to a new low of recent two months. Part of the bearish pressure can be explained by the market expectation on the interest rate cut from 0.25% to 0.1% by the Reserve Bank of Australia next month. It is currently hovering around the support level at 0.7070. The faster MA is approaching slower MA as the slower MA becomes flattened. At the same time, the RSI is also going up. If AUDUSD stands above 0.7070, and both MA (the faster MA crosses the slower MA) and RSI (stands above 50, AUDUSD) simultaneously show a buying signal, it may settle above the support level and start to rebound. Otherwise, it may continue the downtrend and be traded between 0.6830 to 0.7070 next week.
Resistance: 0.7070, 0.7210
Support: 0.6870, 0.6830
The GBPUSD broke below the strong support level at 1.2780. Fortunately, the breakout did not give rise to another weekly downtrend. It was mainly fluctuating within the small range between 1.2690 and 1.2780. From the chart above, the faster MA crosses slower MA from below and RSI is very close to 50. We can expect an upward correction might take place this week.
Support: 1.2690, 1.2510
The plummet of the yellow metal has been resisted at 1862.50 level for many days. It suggests that the support is strong and the gold price might not easily break through such interval. The flattening slower MA and the rising RSI from oversold zone also provide evidence for the loss of bearish momentum. We can expect it will either consolidate between 1848.00 and 1876.50 or surge to near 1900.00 for the near term.
Resistance: 1876.50, 1900.00, 1970.00
Support: 1848.00, 1815.00
|29 Sep 2020||Harmonized Index of Consumer Prices (YoY)(Sep)||-0.10%|
|30 Sep 2020||Presidential Debate|
|NBS Manufacturing PMI(Sep)||51.2|
|Gross Domestic Product (QoQ)(Q2)||-2%|
|Retail Sales (YoY)(Aug)||3.40%|
|Consumer Price Index – Core (YoY)(Sep) PREL||0.70%|
|Consumer Price Index (YoY)(Sep) PREL||0.20%|
|ADP Employment Change(Sep)||600 K|
|Gross Domestic Product Annualized(Q2)||-31.70%|
|1 Oct 2020||Tankan Large Manufacturing Index(Q3)||-23|
|ISM Manufacturing PMI(Sep)||56|
|2 Oct 2020||Retail Sales s.a. (MoM)(Aug)|
|Nonfarm Payrolls(Sep)||875 K|
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