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30 September 2020

Dollar rises after an ugly presidential debate, US data, end-of-month flows eyed

President Donald Trump and rival Joe Biden clashed in an acrimonious televised debate. S&P 500 futures advanced at first but retreated as Trump refused to say he would accept the election results. Biden came into the televised clash with a lead and it will take several until new polling shows any change in voting intentions.

Christine Lagarde, President of the European Central Bank, is due to speak in Frankfurt and may shed light on the ECB’s next moves. She speaks after German and Spanish inflation figures reflected ongoing weakness and coronavirus cases are rising in the old continent. EUR/USD managed to rise above 1.17 on Tuesday, potentially also worrying the bank, that would like to see a lower exchange rate.

Brexit talks continue with somewhat less optimism than seen earlier in the week. GBP/USD failed to rise with EUR/USD on Tuesday. Final Gross Domestic Product figures are showing a fall of 19.8% crash in the second quarter, an upgrade from -20.4% initially reported.

ADP, America’s largest payroll provider, publishes its jobs figures for September. The first hint toward Friday’s official labor statistics is set to show a pick up in hiring. It is essential to remember that the firm’s data has not been well-correlated with government data in recent months.

The final US GDP for the second quarter is set to confirm an annualized fall of 31.7%. A substantial rebound is due in the third quarter. Pending home sales for August and speeches from Federal Reserve officials are also awaited.

Canadian GDP figures are projected to show an extended recovery in July, following the 6.5% expansion in June. USD/CAD is trading around 1.34, rising as oil prices are on the back foot.

Scope for 1.1495 as near-term USD weakness is expected to peter out – Commerzbank

EUR/USD managed to rise above 1.17 on Tuesday and Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, believes the pair is executing a return to point of break out. The upmove should fade at the 1.18 downtrend and a fall to the 1.1495 is likely.

Key quotes

“EUR/USD is seeing a small rebound. We suspect that it is executing a return to point of break out from a top. In which case we should see the rally struggle 1.1755/67 and remain contained by the short-term downtrend at 1.1800. We should then see renewed weakness towards 1.1523, the 38.2% retracement and then the March high at 1.1495 (this is also the measurement down from the top).”

“There is an outside chance that losses could extend to the 200-day ma at 1.1245, but that is not our favoured scenario.”

“The short-term downtrend guards 1.1870/1.1971 and only above here will re-target the 1.2014/15 region.”

Crude Oil Futures: Rising odds for a deeper pullback

CME Group’s preliminary readings for crude oil futures markets showed investors increased their open interest positions for the sixth consecutive session on Tuesday, this time by around 20.5K contracts, recording at the same time fresh multi-week tops. In the same line, volume went up sharply by around 343.3K contracts, the largest single day build since September 8 and also coincident with another sell off in the commodity.

WTI: A retracement to the $36.00 region is not ruled out

Prices of the WTI sold off to the $38.40 region on Tuesday amidst rising open interest and volume. That said, further losses remain well on the cards for the West Texas Intermediate and could extend to the area of the September lows near the $36.00 mark per barrel.

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