Friday September 2nd, 2020

The US President tests positive for COVID-19 causing oil, equity & currency markets to weaken on the news. Risk aversion emerged after the US Presidents announcement which saw safe haven JPY (+0.4%) and US$ both strengthened. Currency markets overall are relatively stable with CNY flat, Asian currencies down 0.15% on average vs US$. Trading currencies NOK down 0.15%, MXN down 0.22%, NZD down 0.25%, AUD down 0.4%, and MXN down 0.6%. Expect today to eventful as markets digest the US Presidents diagnosis, the US Jobs data and updates on US Stimulus relief. The jobs data is likely to show slowing recovery. The House Dems pass US$2.2 trillion stimulus bill without bipartisan support, but with Pelosi & Mnuchin continuing to talk suggests there is still some hope. The potential for increased market volatility remains high.

Oil prices were already under pressure, now the Presidents diagnosis has added further weakness to oil prices. Oil dropped 4% overnight, down over 6% for the week and enters its 2nd down week. C$ weakened from yesterday’s 10-day high on the US Presidents news and weakening oil prices. C$ found support from domestic data that showed much better than expected factory activity. Markets are entering into some unknown territory with the US Presidents diagnosis with greater potential for increased volatility. Support at 1.3260, with resistance at 1.3330, if breached look for a move back to 1.3420.

Eur is relatively stable but is vulnerable to further weakness. The news of the US President positive for coronavirus news saw markets adopt a risk-off sentiment. EU inflation data came out below expectations, adding pressure to the Euro. Focus will remain on US President updates, US Fiscal stimulus developments and Non-farm payroll results. Expect Euro to remain vulnerable to market headlines today. Support/pivot at 1.1670 with key support at 1.1625, resistance remains 1.1785.

GBP rallies through 1.29 vs US$, ignoring US Presidential news and focusing on the UK PM intervention in Brexit talks. PM Johnson stepped into the Brexit talks to schedule a call on Saturday with the EC President Von der Leyen. News of schedule call triggered fresh hopes for a breakthrough in the Brexit negotiations. GBP rallied on Brexit hopes, but we have seen this scenario before, and any lack of progress will likely see GBP reverse. Today news out of the US will dictate intraday direction. Support 1.2765 with resistance lowering to 1.2950.