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22 October 2020

Foreign intervention in US elections weighs on mood, jobless claims, politics eyed

President Donald Trump and challenger Joe Biden will clash in the final debate late on Thursday. Recent national and state polls have been pointing to some tightening, yet the Democratic candidate remains in the lead. 12 days ahead of Election Day, around 44 million have already voted, around 32% of all votes counted in 2016.

Fiscal stimulus: House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have reported additional progress in talks with Pelosi saying they could “put pen to paper.” On the other hand, Senate Republicans seem to be pushing for legislation to pass only after the elections. Investors remain hopeful for a deal in its current form, or a larger package if Dems win full control.

US Initial Jobless Claims may be of greater interest than usual on Thursday, after jumping to 898,000 in the previous week. The upcoming data is for the week ending October 16, when Non-Farm Payrolls surveys are held.

See US Initial Jobless Claims Preview: Losing the prediction panache

Brexit: Chief EU Negotiator Michel Barnier is leading a large delegation to London, to resume and intensify Brexit talks. UK Prime Minister Boris Johnson returned to the negotiating table five days after abandoning it, now aiming to clinch an accord by mid-November. GBP/USD soared on Wednesday and has been holding onto its gains.

Eurozone coronavirus cases continue rising, with more authorities slapping restrictions to spread the disease. Spain’s infections surpassed one million, while Germany’s Health Minister Jens Spahn also tested positive. European Central Bank member Fabio Panetta may comment on the economic implications in a speech on Thursday.

GBP/USD: Strong near-term recovery towards the March high at 1.3201 – Commerzbank

GBP/USD soared on Wednesday and Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, looks at the 1.3201 March high after the cable moved above the 1.3085 mark.

Key quotes

“GBP/USD has seen a pretty strong rebound from the 20-day ma and this has effectively neutralised the near-term outlook. It is immediately bid above the near-term uptrend at 1.2881.”

“The move above 1.3085 implies that the market is capable of retesting the 1.3201 March high and the recent high at 1.3483. In this vicinity is the 1.3468 multi-year downtrend and if seen we would allow this to again hold.”

EUR/USD loses the grip and tests 1.1840 ahead of data

EUR/USD focused on data, risk trends

EUR/USD sees a mild correction from recent tops around 1.1880 in the wake of the opening bell in Euroland on Thursday and amidst a renewed pick-up in the risk-off mood, particularly in response to stalled discussions around another US fiscal stimulus bill.

In the meantime, the focus of attention remains on the advance of the second wave of the coronavirus pandemic and its effects on the economic recovery, all in light of renewed restriction measures and partial lockdowns in several countries/major cities in Europe.

What to look for around EUR

EUR/USD extends the bounce off last week’s lows in the 1.1690/85 band and already navigate in multi-week peaks well above 1.1800 the figure. The outlook on EUR/USD remains positive and bearish moves are deemed as corrective only. Further out, the positive bias in the euro remains underpinned by auspicious results from domestic fundamentals (despite momentum appears somewhat mitigated in several regions), the so far cautious stance from the ECB and the solid position of the EMU’s current account. In addition, the probable “blue wave” following the US elections is deemed as a negative driver for the greenback and carries the potential to lend extra legs to the pair in the longer run.

EUR/USD levels to watch

At the moment, the pair is losing 0.13% at 1.1841 and faces the next support at 1.1688 (monthly low Oct.15) followed by 1.1612 (monthly low Sep.25) and finally 1.1495 (monthly high Mar.9). On the other hand, a breakout of 1.1880 (monthly high Oct.21) would target 1.1917 (high Sep.10) en route to 1.1965 (monthly high Aug.18).

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