FX & market recap:
The US dollar has been weighed, measured, and found wanting. Rampant coronavirus outbreaks and the lack of a national strategy to combat the outbreak is jeopardizing the economic recovery. The CARES Act which was implemented to aid Americans affected by COVID-19, expires Friday and politicians are still debating a replacement. The US deficit has ballooned, employment data is weakening, and social unrest is turning American cities into war zones. The upcoming Presidential election and rising geopolitical tensions, are adding to the dollar’s woes.
Gold prices climbed to a new record high. XAU/USD have risen 34% since March 11 with the $2,000/ounce level luring buyers like a mermaid does for sailors. US dollar weakness, global zero and near zero interest policies, and geopolitics are fueling the gains.
Canadian dollar highlights:
USD/CAD drifted lower along with the US dollar weakness, but soft oil prices acted as a drag. Prices may be vulnerable to a pre-FOMC meeting bounce, and if so, it will find plenty of sellers. Traders are also concerned about US/China tensions.
EUR/USD rallied, rising from 1.1640 to 1.1733, where it sits in early NY trading. The prospect that the Eurozone economies will outperform that of the US, supported by last week’s EU Summit decision to provide COVID-19 relief continues to underpin prices. Better than expected German IFO Survey data supported prices. The EUR/USD rally could stall at current levels as 1.1732 is the 61.8% Fibonacci retracement level of April 18, 2018, to March 17, 2020 range.
British pound highlights:
GBP/USD tracked EUR/USD higher, and for all the same reasons, rising to 1.2868 from 1.2793. Traders ignored a bleak report from the EY Club, predicting an economic recovery wouldn’t be completed until 2024. They also do not seem too bothered with news that the EU/UK trade talks are reportedly at an impasse. If GBP/USD can sustain gains above 1.2844, it leaves the door wide-open to a test of the 2020 peak of 1.3290.
Asia Pacific highlights:
USD/JPY broke below key support at 106.60 last week, setting the stage for further losses to 104.10. Soft US Treasury yields, geopolitical tensions, and US dollar weakness are undermining prices. Meanwhile, AUD/USD and NZD/USD are riding the bearish greenback wave. Oil price gains are capped by concerns the resumption of COVID-19 in America will curtail demand.