October 1, 2020 5:46:51

The end of September closed with a whipsaw fashion. The USD safe-haven gains were erased overnight as green shoots of positive data were produced. US annualized GDP recovered to -31.4% beating the forecast of -31.7% and ADP employment change showed 749k people had returned to employment beating the forecast of 650k. However, monthly GDP declined by -2.1% coming in under the forecast which may have put pressure on the recent recovery of the USD.

Global equities enjoyed a positive run overnight as the Senate in the US reached a partial short term arrangement to protect the US economy whilst they continue to debate the next stimulus package. More positive news regarding BREXIT has also provided some support. The market has taken the news as positive and the German Dax could be teasing a breakout of a BULL flag structure.

Yesterday, all eyes were on the Presidential debate between Trump and Biden. As expected, the debate turned into a shouting fest with observers calling it a train wreck. Trump appeared to get the better of Joe Biden, partly due to the constant interruptions and failing to allow Biden to finish his points of view. The US stock market closed the day in the green as Trump maintained his view of low Corporate tax policies. Biden threatened to increase Corporate tax, which may have an impact on the US stock market at a later stage if he becomes a front runner.

Traders were watching the potential bull flag breakout on the USD which drew in a number of buyers. The breakout reversed and the DXY closed for the third consecutive day in the red. The fake rally on the USD was partly due to the threats made by Trump. Trump threatened he would not be leaving the office if there were any signs of election tampering.

DXY INDEX

USD traders are now watching the 9340-9350 support zone. A break below the rising trend line may indicate further downside is yet to come on the USD. The USDCAD is also approaching a major support zone and trendline.

USDCAD

The recent pull back on the USDCAD could be setting up an inverted head and shoulders formation. This will depend largely on the DXY and if it maintains its strength. If the USD finds support the inverted head and shoulders formation could play out.

Commodity related currencies have surged overnight shrugging off the escalating covid-19 cases coming out from the EU and UK. Crude Oil ticked higher on positive statements made from President Trump suggesting a covid-19 vaccine would potentially be ready by year-end. The CAD strengthened across the board along with oil prices.

Tonight, all eyes are on the economic calendar again, as the US reports their continuing jobless claims and initial jobless claims. The result will give an indication into Friday’s US unemployment data which will be a big driver in the direction on the USD over the coming weeks. The FED has signalled the importance of the labour market returning to full force.

If the USD suffers another day of losses traders will be eyeing a potential breakout on the EURUSD to the upside.

EURUSD

The EURUSD is trading between a descending channel formation. Traders will be watching the market around the 1.1770 resistance zone which is the cap of the negative channel.