As the cases of new coronavirus infections rise around the world and the hope of new economic stimulus from the US dwindles, the institutional money managers move their holdings from risky assets to more liquid USD and JPY. This brought the price of crude oil down and helped USDCAD to move higher. Both of our target areas were penetrated. Another asset benefitting from uncertainty in yesterday’s trading was gold. The price of the yellow metal created a higher low at 1889 and moved higher in the New York session but failed to create a higher high. This resulted in some weakness below the 1912 resistance level.  By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.

We said three days ago that the price of oil dropping would be likely to help USDCAD higher and hit our T1 and possibly even T2. This has now happened both the target zones have been penetrated. The pair has moved above the descending trendline we talked about yesterday but it still has to move clear the resistance 1.3241 resistance. Should it fail to do so and violate 1.3210, then we could see the pair moving down to 1.3143 – 1.3163 zone where we’d expect to see short covering. In the case of the bullishness continuing the next significant resistance level (above yesterday’s high of 1.3259) can be found 1.3340. 

Stocks started to rally after the Philly Fed manufacturing index was confirmed to more than double the expectations. The actual number was 32.3 while analysts had expected the gauge to decrease from 15 to 14 index points. Worse than expected unemployment claims (898K vs. 810 expected) did nothing to stem the bulls.  Yesterday’s price action suggests that traders aren’t willing to take stocks lower today but we should keep in mind that this optimism could be short-lived after the traders realise that this manufacturing data is actually backwards-looking data and the harsh reality is that the Covid-19 cases are on the increase around the world. In the light of this have brought our targets higher to 11720 – 11790 (T1) and 11540 – 11620 (T2).

Keep an eye out for potential volatility though as the US retail sales numbers are released. Core retail sales are expected to come in at 0.4% and the headline number at 0.7%. Preliminary UoM consumer confidence numbers are due also today. Analyst consensus expects there to be no significant change in the number (80.2 vs. 80.4 prior).

EURUSD is trending lower in a channel with 1.1720 resistance right above. The nearest support is at 1.1684 and if it’s taken out, it’s likely that the pair will move to 1.1660 – 1.1675 range where we have the 78.6 retracement level and the channel low. This is what looks likely based on the current trend but at the same time EURUSD has corrected quite a bit and therefore the downside is getting limited. Should there be surprise news or the pair would start to consolidate and break resistance levels then 1.1740 – 1.1760 resistance could come into play. As it’s Friday today and supports are getting close there is a risk that the market could generate rallies and the moves to the downside are not that big. Therefore it makes sense to keep the target levels nearby. The key S&R levels to pay attention to are: 1.1684 and 1.1720.

For more analysis on these and other markets, go to tiomarkets.com/analysis and don’t forget to subscribe to TIOmarkets YouTube channel.

Recent macroeconomic data releases

  • US Unemployment Claims, 840K, 820K expected
  • Canada Employment Change, 378.2K, 150K expected
  • Canada Unemployment Rate, 9%, 9.8% expected.
  • UK Claimant Count Change, 28.1K, 39.5K expected
  • US CPI, 0.4%, 0.2% expected
  • US Core CPI, 0.4%, 0.2% expected

Macroeconomic data releases today

  • Australian Employment Change, -29.5K, -38K expected
  • Australian Unemployment Rate, 6.9%, 7.0% expected
  • US Philly Fed Manufacturing Index, 32.3, 14.4 expected
  • US Unemployment Claims, 898K, 810K expected

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

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Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

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Janne Muta
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