FX Weekly

FX Weekly Update – October 19th, 2020

Posted Under: Weekly updates

Larry Summers (Head of the Obama Economic Council) said that the USD is not at risk of falling, even though U.S. debt continues to rise. The Bloomberg article does surprise most economists because the overall opinion along with the technical studies points to a much lower dollar. The history of USD does have an approximately 10 year trend before turning. The index is over 10 years in trending higher, so all things do point to a lower USD. The retail sales numbers and the Michigan Consumer sentiment, released on Friday in the U.S., were both better than expected. That news kept the USD slightly higher on the week! Another U.S. Presidential debate is this Thursday. More importantly, Leader Pelosi said that they seem to be closer to another Covid stimulus before the election on November 3.

EUR (1.1720): We begin this week exactly were we did last week. The same concerns: the increase in European Covid cases, Brexit, U.S. election along with the cross currency flows are keeping EUR at these similar levels. Brexit remains the topic of debate and there has not been any real breakthrough. Keep the “powder” dry and play the range of 1.1650 to 1.1900.

GBP (1.2915): Like EUR, the pound opens the week at the same level as last week. GBP is more sensitive than the EUR during the Brexit negotiations. Boris Johnson said that “we may have to go it alone” and that took the bid or support away from the currency. Same issues this week, news about Brexit will determine the health of GBP.

CAD (1.3185): Compared to last week CAD did gain about 100 pips. Oil prices were rising, providing the support but fell late in the week taking some strength away. With CAD so dependent on commodity prices, its future is correlated closely to oil and metals. Global growth has been picking up but with Covid increasing, the risk of a weakening recovery becomes real!

MXN (21.10): This last month MXN has been impressive. Watching the U.S. polls and the potential blue wave have investors pouring cash into Mexico. If they are victorious, the idea of unstoppable immigrants crossing the Southern border, gaining access to free healthcare and college will force a lower dollar. 21.00 to 20.25 are support levels.

CNY (6.6965): The BOC (Bank of China) lowered rates this week and released positive economic numbers. Having a stronger currency makes products purchased from China more expensive. Strangely, this has been a goal for global politicians for 15 years! Support for the CNY is at 6.60 and 6.45. Watch for further economic releases from China that will add further momentum to the currency.

CNY versus CNH? Keep an eye on GreenshootsFX.com this week for a comparison and why more volume is traded in CNH and how it can be used as an effective hedge for China related expenses.