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Oct 06 - 05:55 PM

EUR/USD - COMMENT-US Recap: Trump Tweet Ditching Relief Talks Breaks EUR/USD Stalemate

By Randolph Donney  —  Oct 06 - 03:35 PM

The safe-haven dollar and yen rose late on Tuesday after U.S. President Donald Trump called off coronavirus relief talks with Democrats until after the election nW1N2GE042.

Trump's announcement, made in a tweet, followed cautionary comments from the Fed and ECB about the economic recovery.

Fed Chair Jerome Powell had warned that the U.S. economic recovery remained at risk nL1N2GX0ZL while ECB President Christine Lagarde said a second wave of the coronavirus pandemic risks delaying the euro zone's rebound nF9N2G601FnS0N2FX00N.

S&P Global predicted that U.S. and European corporate default rates could double over the next nine months nL8N2GX4GJ.

German industrial orders rose more than expected in August nL8N2GX0XF, but increased pandemic disruptions since then continue to slow the euro zone's recovery.

Investors will scrutinize the FOMC minutes on Wednesday and ECB monetary policy accounts Thursday, though policymakers have made their views known since the last policy meetings.

That could leave the market focus on pandemic news and the likelihood of U.S. fiscal stimulus after the Nov.
3 election if lawmakers fail to revive relief talks following Trump's tweet.

The swift rise in 10-year Treasury yields from Friday's 65.3bp risk-off low to Tuesday's 79.2bp peak past August and mid-June recovery highs, kept a supportive hand under the dollar before Trump's announcement.

The dollar index jumped to the day's high 93.793 after the tweet, pulling away from 30- and 55-day moving averages and 50% Fibo supports around 93.34/24.

After a fleeting rise earlier in the day to an 11-session high just above 1.1800, EUR/USD fell to the day's low of 1.1735 after Trump scuttled the relief talks.

GBP/USD also accelerated lower in the U.S. afternoon, and was down 0.62% at 1.2897.
Its earlier rise above 1.3000 in London faltered by the Sept.
16 rebound high at 1.3008 and near the 55-DMA at 1.3016.

Cable had been helped by a Reuters story indicating "big progress" in EU-UK trade talks nL1N2GX0ROnL8N2GX51C.

USD/JPY, and most key yen crosses, ran into resistance as Monday's risk rebound ebbed nL1N2GX0M7.
AUD/JPY's rejection from key resistance highlighted this risk rethink nL1N2GX0XC.

USD/JPY fell toward at the tenkan and Monday's low at 105.375/35 on EBS.
Its earlier high came by Monday's 105.795 peak, last week's 105.80 recovery high, the 55-day moving average and 61.8% Fibo at 105.82, as well as the daily cloud base at 105.85.
That was too much resistance to clear without a strong macro reason.

AUD/USD sped up its retreat after already losing ground following the RBA's dovish hold and the government's deficit-spending pandemic plan.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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