The Week Ahead: Round Two

Markets eagerly await new US stimulus plan

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USDJPY Bounces Ahead of Key Data

Risk aversion has put the US dollar back on track at the expense of risk-sensitive assets, for now. Short side’s profit takings ahead of this week’s string of data have likely contributed to the rebound. Both national output and employment figures could help stabilize the currency if they show signs of improvement.

However, it would be too soon to call the bottom as a new trillion-dollar stimulus package might hit the shelf in the coming weeks. This would mean that a rally could run into stronger selling interests.

106.50 is a critical resistance level and a failure to break out would lead the price towards 103.00.

AUDCHF Sinks as Sentiment Turns Sour

When Europe sneezes, the Aussie catches a cold. New COVID-related restrictions across Europe are reminiscent of the broad sell-off just six months ago. Falling commodity prices can only add pressure to Australia’s export economy.

The currency could see a reversal to the downside if speculations run wild that the Reserve Bank of Australia might cut interest rates by the end of the year. A disappointing reading from this week’s retail data could build the bearish case.

The pair has so far failed to rally above the double top (0.6700). A breakout below 0.6500 may trigger an extended sell-off towards 0.63s.

EURNZD Rebounds after Downbeat RBNZ

Volatile market sentiment has taken a toll on the New Zealand dollar as hopes of swift recovery start to fade. Despite renewed economic woes in the Eurozone, the single currency may well be better positioned than the growth-sensitive Kiwi.

A dovish Reserve Bank of New Zealand has left the door open for more easing next year. As a matter of fact, policymakers have already instructed the country’s banks to get ready for a negative rate regime.

The euro bounced back from the key support level of 1.7450. On the upside, before any major rally could materialize, offers around 1.8200 will need to be lifted.

GBPCAD Struggles as BoE Ponders Negative Rates

The UK is stuck between a rock and a hard place as both the health crisis and Brexit give no sign of relief yet. The currency has found limited bids after the government vowed to extend its jobs support program.

Nevertheless, unemployment is expected to rise by the end of the year and compounded by the risk of a no-deal divorce with the EU, talks of negative rates from the Bank of England may keep the pound subdued.

The upcoming GDP, should it come in positive, may offer a temporary uptick even if the bigger picture is far from being rosy.1.6750 is a major support to keep the pair within its consolidation range.

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