Monday November 23rd, 2020

The US$ index falls to 2 ½ years lows as vaccine optimism dampens US$ safe haven demand. AstraZeneca-Oxford joins Pfizer and Moderna today when it announced its vaccine can be 70% to 90% effective. Equity, commodity and currencies extend their gains on the vaccine news. In the US virus hospitalizations rises above 83k and concerns rise as the mortality curve continues to rise. On the political front The President is failing in his attempts to overturn election results and is expected to come under greater pressure to allow the transition process to begin. CNY is flat vs US$ as the US is expected to move to restrict 89 Chinese companies from buying tech and other goods from the US. Asian currencies strengthen just 0.1% on average vs US$ as CNY stalls. Euro & GBP strengthen on Brexit optimism and risk-on sentiment. Trading currencies strengthen with JPY up 0.15%, NOK up 0.25%, AUD up 0.35%, NZD up 0.45%, MXN up 0.65% and ZAR rallying 0.8% vs US$. Intraday US election updates and US Markit PMI data results will be watched closely for intraday direction.

Oil prices continue to edge higher, currently +1% on expectations of growing oil demand on vaccine progress. Oil sentiment was also boosted by expectations OPEC will likely extend its output cuts into 2021. C$ continues to edge stronger as vaccine optimism weakens the US$ and boosts oil pricing. In other news, Canada and the UK signed a trade agreement which will come into effect January 1st, 2021. Momentum continues to favour the C$, but opportunities may still arise to sell on any short term rebounds. Intraday markets will focus on US data and oil prices for direction. Support holds at 1.3025, if breached look for 1.2928 next, while resistance at 1.3122.

Euro tests 1.19 on vaccine hopes, a weaker US$ and mixed Markit PMI data. Another Monday and a 3rd company announces positive vaccine effectiveness boosting further investor confidence. Mixed PMI data results across Europe, but overall the data can be viewed as mildly positive within the current pandemic conditions. Investors will now focus on a possible ECB response to a rallying EUR after it breached 1.19 levels. Markets will continue to follow US Trumps response to his election legal challenges, Brexit and current covid-19 conditions across Europe. Support rises to 1.1815 with resistance at 1.1920, if breached look for a test 1.2011(sep1st)

GBP rallies to 2-month highs on Brexit, vaccine optimism and strong UK PMI data. UK papers are reporting that a Brexit agreement is “95% done” and an announcement is expected quickly. AstraZenica announced its vaccine is 70% effective causing UK health minister to say “back to normal sometime after Easter”. Markit’s PMI was expected to decline, but surprised investors by jumping to 45.8 vs expected 42.5. Focus switches to BoE Monetary Policy Report Hearing today. Overall investors are optimist, but GBP remains vulnerable to further volatility until the Brexit agreement is signed. Initial support rises to 1.3325, with minor resistance at 1.3420, if breached look for possible extension to 1.3482 (Sep1st).