LONDON — Thursday was another day of erratic FX price action. The USD ground lower with the DXY more than reversing its move higher in the Asian session. EURUSD touched a low of 1.1737 in the Asian session before reversing up to around 1.1850 as the USD traded offered overnight in a flow-driven move, with little macro news of note. US equities finished lower (SPX -0.8%), GBP initially fell following the BoE meeting, in which policy tools were kept on hold (policy rate at +0.1%) but the BoE signaling that they will engage with regulators on how to implement negative rates. The MPC upgraded its assessment of Q3 GDP growth, left its unemployment rate projections unchanged, but reiterated that the risks on both dimensions were skewed towards further deterioration. However, the pair recovered and finished little changed amid the broad USD weakness. The price action over the past 24 hours more broadly suggest the markets will remain choppy as we head into the end of the quarter when a large rebalancing is expected. The S&P usually trades poorly in the second half of September in particular, following September quadruple witching which is today. On the vaccine front, leading vaccine producers have released their blueprint for its trials in a push for transparency and safety. For example, Moderna released a detailed document on its late-stage trial yesterday. On the fiscal front, Thursday the White House stated a commitment to increase its offer to Democrats and asked Republicans in the Senate to support the effort so a deal could be reached within 10 days. However, the crux of the disagreement between sides remains on the size of the package New Zealand Fin Min Robertson said RBNZ committed to 0.25% OCR until March. The market was not pricing in negative rates until April next year, but a NZD squeeze through 0.6800 is under-priced. EURUSD – the dollar was dumped following the release of the downbeat US jobless claims, Philly Fed manufacturing index and housing data. The pair is once again back above 1.1850 back testing the broken trend line after recovering around 110 pips yesterday from the monthly lows of 1.1737. Looking ahead, the bulls will attempt to resume yesterday's momentum, however giving the light economic calendar, the pair will likely remain directionless in this two-month consolidation. GBPUSD – the pound fell briefly below 1.29 after BoE hinted the high possibility of negative rates in the foreseeable future. Earlier today, the mixed UK Retail Sales kept the Cable subdued below 1.30 as the 7-month trend line and the 50-period SMA are still weighing on price, despite the pair printing higher-lows ever since Sept. 11. The bulls need to break above 1.3015 to confirm further upward momentum. However, the path of least resistance remains to the downside as price could retest yesterday's low in today's session. USDJPY – the pair kept falling yesterday as the short-term bearish trend remains intact as worldwide indexes spent the day in the red. Early in the Asian session, the Bank of Japan kept its monetary policy unchanged as expected. Policymakers said that the economy has started to pick up "gradually," following the setback caused by the coronavirus pandemic. Today, if equities remain weak, then the Yen will likely prick up momentum once again and retest yesterday's low and possibly even lower. FTSE 100 – failed to hit our support target at 5985 as it held above the 6000 mark after surprise comments from the BOE that it could follow Europe down the path of below zero interest rates while keeping them on hold so far. UK retail sales data released in early session today came in better than expected, as we look for 6050 support level to hold, favoring a retest of 6100 resistance level DOW JONES – US stocks fell on the back of weaker than expected labor data as the Dow hit our short support target at 27550, only to print higher in early session today as President Trump pushed for agreement around a large stimulus number and US daily COVID-19 cases remained on a downtrend. An hourly close above 28000 resistance level is needed to confirm bullish momentum. DAX 30 – European equities continue to trade in a range between 13135 support and 13300 resistance level after attempting to hit our short support target in yesterday's session at 13000 with banking stocks leading the decline amidst the ongoing low rate environment with technicals favoring a retest of 13135 support level. GOLD – gold continued to catch a bid on the back of weaker than expected Initial Jobless Claims data out of the US, a weakening greenback, and continued vows by major central banks to roll out further stimulus as Covid-19 cases topped 30 Million. Further upside is looking favorable in today's session with 1960 and 1970 as the next closest resistance targets. USOIL – WTI Crude breached the 200 period SMA on the daily chart, hitting our long entry resistance targets at $40 and $41 pbl, as it ended yesterday's session on a two week high close after OPEC+ agreed to extend the compensation period for overproduction till end of December as the Saudi oil minister warned short traders whilst telling them to "make my day" ! Looking for an hourly close above 41.50 resistance level to favor further upside with 42.50 as the next major resistance. — The writer is chief market analyst, Squared Financial.
