Friday November 19th, 2021

The US$ rallies, oil prices tumble, equity markets and US yields are mixed as covid concerns drives market caution. The US$ index retests 16-month highs and oil prices drop below US$80pb as surging covid cases see lockdowns return in Europe. Today, there are no key economic releases, the House of Representatives are expected to pass the US$1.6T spending bill and we more Fed speakers are on the docket. Safe-haven sentiment is returning as Austria announces a full lockdown, causing US$ and JPY buying vs their currency peers. In other news. Former Secretary of State Clinton predicted the Biden administration will lift some tariffs on China, warns of Beijing’s military aggression and criticizes the Russian President. Japan unleashes US$490Bln record stimulus package, bucking global tapering trend to cushion the economic blow from covid. The US seeks common ground with Mexico & Canada at the 3-Amigos summit, but tensions remain over the US’s “Buy America” agenda and on immigration. Covid. Austria reimposes a full lockdown and plans to make covid vaccines compulsory. Germany faces a national emergency as covid cases surge, and the health minister went on to say that she can’t rule out a future lockdown. The UK & Italy are to start covid boosters for over-40s. In currency markets. The US$ Index heads for a 4th week of gains, GBP is set for its best weeks vs Euro since 2020 and Bitcoin has its worst week in months. CNY weakens 0.2% after its central bank sets a weaker-than-expected midpoint rate, while Asian currencies under pressure with INR, IDR and TWD lower 0.1%, SGD down 0.35%, THB weakens 0.55% and PHP & KRW tumble 0.8% vs US$. Trading currencies are mixed with safe haven JPY up 0.3% while AUD, MXN & NZD fall 0.5%, and NOK & ZAR tumble 1.2% vs US$.

Oil prices tumble over 2% as covid lockdown fears in Europe triggers demand concerns and speculation that China, US and other countries may release oil reserves put additional selling pressure on oil. C$ weakens, down 2% month-to-date vs US$ as oil prices tumble and the US$ rallies as covid concerns increases when Austria announces lockdown measures and Germany is expected to follow. Intraday CAD Retail Sales is expected to drop -1.7% vs 2.1% in August, expect C$ to remain under pressure as oil prices remain under pressure.  Support rises to 1.2580, while resistance resets at 1.2670, if breached look for a move to 1.2738 (Oct1st).

Euro slides below 1.13 as global risk mood sours. Reports of Austria going into full lockdown, the prospect of Germany to impose lockdowns and dovish ECB comments weigh on Euro. ECB Lane said that he is not seeing inflation expectations moving above the ECB target making it unlikely to see an ECB rate hike in 2022, causing investors to prefer the US$ alternative in the face of the Fed’s hawkish outlook. Our bias remains bearish for Euro vs the US$, CAD and GBP. Support holds 1.1262, if breached look for 1.1162 (Jun2020) while resistance holds at 1.1370.

EURGBP retests .8381 lows as investors remain concerned of rising covid cases, the Austrian lockdown, and ECB-FED interest divergence. Support resets to .8354 (1.1970) while resistance lowers to .8480 (1.1792)

GBP rebounds off intraday lows despite US$ strength. Brexit concerns continue after Brexit Minister Frost said there remained significant differences between the UK and EU positions on NI and that triggering article 16 was still on the table. A hawkish BoE is providing some support to the pound vs Euro but expect GBP to remain under pressure vs US$ as safe haven buying returns. Support drops to 1.3400 while resistance resets to 1.3490.