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Oct 20 - 05:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Rallies As Relief Hopes Sap Safe-Haven Dollar

By Randolph Donney  —  Oct 20 - 03:05 PM

The euro rose to a one-month high versus the dollar on Tuesday as signs of progress toward U.S. COVID-19 relief spending nL1N2HB0H1nW1N2G5009 diminished the U.S. currency's safe-haven appeal, while record demand at a sale of EU bonds added to the single currency's attraction nL8N2HB23F.

The record 233 bln euros in bids for the EU's inaugural SURE bonds nL8N2HB23F reinforced the euro-bullish notion that the bloc's 750 bln euro recovery fund slated for 2021 would also find plenty of funding support nL1N2HB10D.

Added fuel for risk-on flows and dollar sales came from New York Fed executive vice president Daleep Singh, who said the Fed could buy both corporate bonds and ETFs if there was significant market stress nW1N2GW03H.

EUR/USD rallied to 1.1841 on EBS, its highest since Sept.
21 and near the daily cloud top at 1.1849.

A clear EUR/USD breakout above the daily cloud could squeeze out shorts premised on a potential breakdown below 1.1700 toward the cloud base and 100-day moving average supports near September's 1.16125 low nL1N2HB0VO.

The flip side is CFTC data showing a sizeable net speculative long EUR/USD position remains, tempting sales into rallies.

GBP/USD was little changed as Brexit trade deal debate groaned on amid rising COVID-19 cases in the UK and EU nL8N2HB24U, which eroded the pound's linkage to the S&P 500.

Pound bulls were stung by Monday's bearish rejection from the 55-day moving average, resulting in Tuesday's indecisive inside day, while EUR/GBP climbed to its highest since this month's peak on Oct.

USD/JPY popped above 50% and 61.8% Fibos of the recent 106.11-5.04 drop at 105.575/70, but the early U.S. rise was rebuffed by offers at the 55-day moving average line at 105.75 nL1N2HB15B.

Broader dollar slippage on relief bill hopes and 10-year Treasury yields again running into resistance at 80bp ushered in a retreat to the 10-DMA by Monday and Friday's highs at 105.50 and then below.

AUD/USD struggled in the wake of dovish RBA minutes, but reversed hard upward after nearing September's lows, taking its risk-on cue from rebounding U.S. stocks and relief bill prospects nL1N2HB17I.

The Fed's beige book report Wednesday is the last substantive event risk ahead of Thursday's jobless claims report and the presidential debate.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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