Thursday August 13th, 2020

The US$ remains under pressure as the US stimulus impasse continues. Congressional Dems are being accused of not willing to negotiate and are being blamed for the 5-day stall in talks over relief legislation. Sino/US tensions continue to remain an ongoing concern ahead of the Aug15th review of the Phase-1 trade deal. Risk-on sentiment continues as investors bet that the US will agree on a stimulus relief package. Chinese CNY managed to test its 5-month highs vs US$ before its rally stalled. Euro currencies were the big gainers today with NOK leading the way at +0.65%, while the rest of Europe were up ¼ to ½% vs US$. Focus shifts back to US initial & continuing jobless claims which will provide the US$ direction today.

Oil prices stall at near 5-month highs after the IEA lowers its demand forecast in 2020 for aviation and domestic oil use related to the pandemic. C$ extended its gains overnight testing fresh 6-month highs vs US$, but failed breach the key 1.3198 support level. Oil prices dropped marginally on the IEA demand forecast, but any further retreat in oil prices could put pressure on C$ and see a rebound towards 1.33 levels again. Support at 1.3198 (Feb21), if breached expect 1.3120 (Jan 23rd low), with resistance at 1.3235.

Euro gained on a weaker US$ amid rising European coronavirus cases and static CPI data. No surprises for European CPI data which came in as expected, while French unemployment rate came in better-than-expected. Rising coronavirus cases across Europe, but specifically in Spain which overtook the UK for the total number of virus cases.  The Euro has not been impacted by the rising virus cases as officials insist its local flare ups and not a second wave of virus infections. Euro moment is slowing, and rising Covid-19 cases could put pressure on the single currency. Support at 1.1700 with resistance 1.1850 if breached a retest of 1.1915 (Aug6th high).

GBP shrugs off the record fall in Q2 GDP and attempts to retest 1.3100 on the back of a weak US$. Any rebound in the US$ favour could potentially see GBP fall quickly as it faces significant economic challenges and potentially the end of the furlough scheme. With the UK technically in a recession, stalled Brexit negotiations, the prospect of higher unemployment and the BoE keeping negative rates in its back pocket, we remain longer-term bearish GBP. Support 1.2965 with resistance at 1.3130 (Mar20 highs).