Struggling US businesses are to receive more help from the government if the President-Elect Joe Biden’s plans are approved by the Congress. His plan would give most Americans extra $1400 to spend and in doing so support the ailing US economy. Fed’s Chair Jeremy Powell said yesterday that early government spending has had an important impact and has helped to save the economy from a much worse fate. He also commented on Fed’s highly accommodative monetary policy saying that “Now is not the time to be talking about exit”. Neither of these comments has had a significant impact on DXY (the dollar index). EURUSD and gold both remained in their trading ranges. Markets seem somewhat sceptical about Biden’s ability to pass such a massive aid package in the US Congress. If this weren’t the case, the USD would have become under selling pressure and the value of EUR and gold would have risen after the announcement. This can change, however, if it seems that the US lawmakers show a green light to Biden’s plan. US retail sales numbers are due today. See our economic calendar for times and details. By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.

Over the last few days, AUD has been among the strongest (major) currencies against the USD. Only GBP and CAD have had more momentum than the AUD. Today we have a couple of news items that should interest the AUD bulls. Chinese have back away from their complete refusal to buy Australian coal. This important export product has been a major source of income for Australia and further positive developments in trade relations and coal trade negotiations especially, should support not only Australian mining stocks (and thus the ASX 200 index) but also the AUD. Elsewhere, Goldman Sachs is reportedly positive on iron ore (another major export commodity for Australia). The bank believes China’s restocking the iron ore will keep the demand high during the H1 2021 (the first six months). This obviously would be another supporting factor for AUD. Should the Biden’s plan be supported by the Congress this combination of fundamentals would create a good solid case for AUDUSD longs.

At the time of writing this, AUDUSD is approaching a 23.6% retracement level and a key support level at 0.7721 and is oversold as per Stochastics (5.3.3). With a higher low at 0.7665 and a recent high at 0.7820, the pair is creating a bullish triangle. Together with the positive fundamental news, we should see buying at key supports above 0.7665 – 0.7685 support zone (38.2% retracement and triangle low). If the price falls below this zone the price has broken out of this bullish formation and price action would need to be re-evaluated as it no longer supports the bullish fundamental views. Open a VIP Black account with us.There are no per trade execution or monthly fees on our VIP Black accounts.

Recent macroeconomic data releases

  • US Average Hourly Earnings 0.2% expected
  • US Non-Farm Employment Change 60K expected
  • US Unemployment Rate 6.8% expected
  • Canadian Employment Change -62.5, -32.5K expected
  • Canadian Unemployment Rate 8.6%, 8.7% expected
  • US Average Hourly Earnings 0.8%, 0.2% expected
  • US Non-Farm Employment Change -140K, 60K expected
  • US Unemployment Rate 6.7%, 6.8% expected
  • US CPI 0.4% expected
  • US Core CPI 0.1% expected

Important macroeconomic data releases this week

  • US Core Retail Sales -0.1% expected
  • US Retail Sales 0.0% expected

You may access the times and dates in the economic calendar here.

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Janne Muta
Chief Market Analyst
TIOmarkets.com

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