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25 September 2020

Gold cheers reduced US dollar’s demand amid stimulus hopes

The US dollar held steady, following the retracement from two-month highs, as persistently higher US Jobless Claims offset optimism over a likely US fiscal stimulus deal. Also, a mixed message from the US Federal Reserve (Fed) policymakers on the inflation and employment front left investors in a tipsy.

Asian stocks traded mixed, with the Chinese stocks the main laggard after the country’s No. 2 property developer warned of a cash crunch. Reports that Novavax Inc launched a clinical late-stage trial of coronavirus vaccine in the UK offered some support to the traders.

Across the fx board, AUD/USD extended the bounce above 0.7050 despite a drop in the Australian Trade Surplus last month while USD/JPY once again failed above 105.50 after Japan confirmed the easing of entry restrictions for new arrivals into the country.

EUR/USD consolidated the bounce to 1.1688, with the risks still skewed to the downside amid intensifying virus spread in Europe. Germany reported 2,321 new infections, the highest in five months.

GBP/USD showed some signs of life above 1.2750 amid UK Finance Minister Rishi Sunak’s job protection scheme and renewed Brexit worries. The Financial Times (FT) France’s Europe minister Clément Beaune dismissed the UK’s ‘intimidation’ on a post-Brexit deal. BOE’s Q3 Quarterly Bulletin will be in focus.

Gold extended the recovery to $1875 amid the dollar’s pullback, ahead of the US Durable Goods data. WTI held gains near $40.50 but headed for a weekly loss.

Upside corrective near-term toward six-month downtrend at 0.9446 – Commerzbank

USD/CHF gained traction for the fifth consecutive session on Thursday and shot to fresh two-month tops around 0.9270. Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, sees the pair inching higher heading to the six-month downtrend at 0.9446.

Key quotes

“USD/CHF continues to work higher and remains on course for the 38.2% retracement of the move down from the March peak at 0.9342.”

“It should be noted that there is scope for a test of the six-month downtrend at 0.9446.”

“Dips should remain contained by 0.9094 the near term uptrend. Only a slide below 0.9048 (10th September low) will trigger a slide back to the 0.8998 recent low.”

EUR/USD Rebounds From A Two-Month Low

The euro currency is posting gains for the first time in four days. The rebound comes after the common currency touched down to a two-month low earlier on Thursday.

However, the reversal came just a few pips away from the 1.1600 round-number support.

If the current rebound sustains, we could see the euro rising back to the 1.1715 level.

But if resistance forms here, we could expect prices to drift back lower.

This could mean that the EURUSD might drift sideways between the 1.1715 and 1.1600 region in the near term.

GBP/USD Attempts Recovery From A Two-Month Low

The British pound sterling is closing with gains and price action could see some modest recovery in the near term.

The bullish engulfing pattern comes after price briefly drifted to a two-month low. The Stochastics on the four-hour chart is currently pushing higher.

Prices will need to break past the previous highs of 1.2780 in order to confirm the short term correction.

To the upside, the big challenge will be the 1.3000 handle. Thus, we could expect the GBPUSD to steady between the said levels in the near term.

To the downside, the declines could resume if GBPUSD fails to hold on to the previous lows near 1.2674.

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