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Nov 19 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Sheds Losses As Dollar Haven Bid Evaporates

By Randolph Donney  —  Nov 19 - 03:15 PM

The dollar slipped on Thursday, surrendering gains made before the New York session, as rebounding stocks received a lift from a CNBC report of renewed COVID relief talks nL1N2I52BQ, diminishing safe-haven demand for the U.S. currency.

Unexpectedly high weekly jobless claims nL1N2I42FY initially added to the pandemic angst nL1N2I42CM weighing on riskier assets.

Sentiment was buoyed by above-forecast existing homes sales data as a COVID-related urban exodus and historically low mortgage rates sent sales to their highest 2007, prices up an annual 19.8% and supplies to their tightest ever nL1N2I42IJ.
The COVID relief news gave stocks an added late-day boost.

Fed officials were beating the drum again for further fiscal relief nU5N2EU00VnN9N2GC017, echoing ECB President Christine Lagarde's plea for fast approval and deployment of EU aid nL8N2I51UU being held up by Polish nW8N2GV00YnL1N2I20LQ and Hungarian objections nL8N2I52YH.

Markets expect relief deals eventually but suspect the Fed and ECB may act in the interim to mitigate pandemic damage before vaccines are widely distributed.
Record-low 10-year BTP yields suggest investors see the ECB and the EU keeping financing costs extremely low.

This month's EUR/USD rally, capped off by the Nov.
9 vaccine news day peak of 1.1920 on EBS, is showing signs of fatigue above 1.1900, perhaps from IMM net spec longs still using rallies to take profits nL1N2I51JJ.

Sterling retreated after Wednesday's failed attempt to reach November's 1.3322 high as vaccine hopes withered in the face of nearer term economic worries nL1N2I51D3.

Weaker-than-forecast CBI factory orders data nL8N2I532Y and COVID-19 delays in EU-UK trade deal negotiations nL1N2I51GY were also digested.

Though the pound trades like a last-minute deal will be done, there were reports of some major downside option protection being taken against the pound nL1N2I51TL.

USD/JPY used the overnight dollar rise on risk-off flows into the dollar broadly to retrace 38.2% of this week's slide at today's 104.22 high nL1N2I5162.

Those gains dissipated when stocks bounced, while the yen got a fresh batch of its own haven bids following the U.S. claims data, which pushed Treasury-JGB yield spreads lower.

Strong resistance around 104.50 dims the outlook for rebounds.
Moreover, November's 103.18 lows will be in play if the final 76.4% Fibo of this month's range at 103.77 is closed below nL1N2I5162.

The biggest mover was the Turkish lira, which clawed back a couple of percent of its massive 2020 losses when the new central bank leadership hiked rates 4.75% to 15% to fight inflation nAPN037KZW.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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