The Week Ahead: No Bidding

US dollar at new lows as Biden wins

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USDCHF Weakens Over Blue Presidency

The US dollar may not have seen the end of the bearish tunnel yet. The prospect of Democrat Biden winning the US presidency had already prompted fresh selling of the dollar. Expectations of a larger fiscal stimulus from the blue side would continue to push riskier assets to new highs.

Meanwhile, the Fed has its hands tied and did nothing but keep its zero rate policy to support the economic recovery, effectively capping the greenback on the upside.

The pair has broken below the psychological level of 0.9000 which could bring in more selling interests. 0.9200 is the immediate resistance in case of a short-term rebound.

GBPJPY Grinds Higher after BoE Support

The British pound held steady across the board as the Bank of England expanded its QE programme but stopped short of venturing into negative rates.

While the UK goes into a month-long second lockdown, policymakers have pledged to cushion the blow with additional £150 billion of liquidity. What this means is that despite wide divergences between London and Brussels over Brexit talks and short-term volatility, there is an upside bias as long as the central bank does not budge on the interest rates.

The pound is trading in range above the key support of 132.00. A break above 138.00 could trigger a rally towards 142.

NZDCAD Rallies on Risk-On Mood

The New Zealand dollar has held its own despite growing speculations of a rate cut by next year. The kiwi has taken the role of a proxy to global risk sentiment during the US election and reflected bullish bets in equity markets.

Traders will closely follow the RBNZ meeting this week. Special attention will be on comments on the recent drop in unemployment rate and the likelihood of more drastic easing down the road.

The pair has found bids above 0.8600. On the upside, 0.8940 is the major hurdle to lift to break out of the three month-long consolidation range.

EURAUD Dips as Recovery Fades

The euro is under pressure as the bloc’s major economies grapple with the second wave of coronavirus cases. Countries like France and Germany were barely out of the woods at the end of summer. New restrictions are seen as a serious threat to the fragile recovery.

Friday’s GDP is expected to show a 4.3% contraction, but a gloomier number would raise the risk of a double-dip recession. In contrast, investors are more likely to turn to the Australian dollar – China’s proxy to bet on what a post-Covid world would look like.

The pair is testing the critical support of 1.6150. A bearish breakout could lead to another round of sell-off.

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