The US dollar remained on the defensive starting out a fresh week this Monday, extending last week’s softness, courtesy of the gridlock on the US fiscal stimulus. The US lawmakers are still nowhere near agreeing on new relief aid, which could likely thwart the nascent economic recovery.
AUD/USD was the top gainer in Asia and regained 0.7300, helped by the upbeat comments from Australian Prime Minister (PM) Scott Morrison. He predicts a job bounce-back as Victoria prepares to reopen. The kiwi also followed suit and headed back towards 0.6800 after NZ PM Ardern lowered the country-wide alert outside Auckland to level 1. The yen advanced on broad risk-aversion against the US dollar, with USD/JPY downed to near two-month lows of 104.26.
EUR/USD jumped back onto 1.1850, with the 1.1900 level back in sight, as the common currency shrugged-off concerns over the coronavirus resurgence in Europe. Fresh restrictions were imposed in Greece and Denmark last Friday. Spain and France mulled local lockdowns amid a spike in infections. Among other news, the European Central Bank (ECB) launched a review of its pandemic bond-buying program (PEPP), as cited by the Financial Times (FT).
GBP/USD stood resilient above 1.2950, despite the increasing odds of a nationwide lockdown in the UK. Health Minister Hancock said that the country is at a “tipping point.” Chancellor Sunak may extend business support loans. Optimism over a Brexit deal, courtesy of European Commission President Ursula von der Leyen’s upbeat comments, continued to bode well for the pound.
Gold traded on the front foot above $1950 amid the dollar weakness, ahead of the Fed Chairman Jerome Powell’s speech. Oil prices returned to the red despite the US storm-led production halt. WTI posted small losses to test the $41 mark.
EURUSD topped exactly at 3 week trend line resistance at 1.1865/75 so we can assume a break above 1.1880 targets 1.1905/10, perhaps as far as 1.1940/50.
Shorts at resistance at 1.1865/75 worked on the slide to our target of 1.1845/35, perhaps we can reach as far as 1.1800/90. We should have some support at 1.1755/65 but below here retests last week’s low at 1.1740/35.
AUDUSD outlook is unclear in the sideways trend. First support area is at 7300/7280 (which held on Friday). A break below 7270 risks a slide to 7250/40, perhaps as far as 7220/10.
Holding above 7300 allows a recovery to 7330/40 (we topped exactly here on Thursday & Friday), perhaps as far as 7365/75 before a retest of the September high at 7410/13.
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