Thu, 09/17/2020 - 15:38
The greenback, like many of the world's majors, has been trading somewhat choppy over the past week. The reasons for this are various: election-related uncertainty, coronavirus concerns, and stock market volatility, to name but a few. Indeed, things were beginning to look a little hairy for the world economy after US equities fell an average of 7% in the first week of September, but it seems as if stocks have been able to avoid a reversal in this traditionally poor month for the markets.
During Tuesday's US session, the dollar was able to recover some of the ground lost earlier in the day to close in familiar territory against many of its major competitors. This was a pattern that repeated across most of the world majors as a critical mass of investors opted to wait for the hotly anticipated FOMC meeting on 16 September before making any significant decisions.
Eye on the EU
The Fibre appears to be shrugging off rising COVID-19 cases across the Old Continent as it benefits from the European Central Bank's laid-back approach to the exchange rate. EUR/USD peaked at 1.1900 in trading on Wednesday following a widely positive ZEW survey and – while it closed Tuesday in its comfort zone around 1.1850 – it has since risen back to 1.1900 in today's session. The single currency's future fortunes will rely, for the most part, on the results of the Fed meeting and tone of Jerome Powell's post-meeting comments. Unless there are any revelations liable to cause the dollar to turn bullish, the EUR/USD pair could continue to push on towards its 1.1915 resistance.
Brexit uncertainty rocking the pound
The pound came under some pressure earlier in the week after the UK's controversial Internal Market Bill passed the first hurdle in the House of Commons. This comes as several Conservative Party members stated their intention to vote down the legislation at its final reading next week. After the initial shock, sterling was able to regain the lost ground and retain it to the close of trade on September 15, despite growing Brexit tensions. However, it would appear that this was mostly due to the knee-jerk effect of positive UK employment data, with the Cable opening above 1.30 yesterday. As such, GBP/USD is still on the rise despite the generally weaker greenback, which could mean that we see continued growth and a potential breakthrough of its R2 of 1.3038.
Yen volatile after Suga
News of the ascent of Japan's new prime minister, Yoshihide Suga, had little to no discernible effect on the pair initially; USD/JPY continued to trade low but steady below 106. However, since the right-hand man of former leader Shinzo Abe assumed office, the pair has plummeted below 105, with the decline showing no signs of slowing. The yen is fast approaching its S2 of 104.45 as its closest resistance of 106.03 continues to fall further out of view. USD/JPY's future trajectory will largely be determined by the outcome of yesterday's FOMC meeting and subsequent press conference, with Asian investors waiting for any strong signals that might emerge later on.
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