US dollar eases as range trade continues

Currency markets remain in a holding pattern

Currency markets have, thankfully, declined to participate in the daily stimulus mood swings prevalent in equity markets now. The net effect though, is that the wait-and-see approach has squashed volatility, leaving currency markets in a range trading holding pattern. Until a stimulus deal is done, or the US presidential debate arrives, that status quo is likely to remain the week’s theme.

The US dollar index eased 0.32% overnight to 94.42, almost exactly in the middle of the index’s broader 93.00 to 94.00 range. That left the EUR/USD and GBP/USD practically unchanged at 1.1775 and 1.2940 respectively. Amongst the rest of the majors, the story was much the same. The technical picture continues to suggest that the major currencies could suffer at the hands of the US dollar over the next couple of weeks. Such a downward correction would be in keeping with risk-hedging flows into the US dollar ahead of the US election, and the complacency surrounding both Brexit trade negotiations and Covid-19 in the United Kingdom and Europe.

In Asia, both the onshore and offshore Chinese yuan’s continue to grind higher versus the dollar, supported by Chinese economic data and China’s interest rate differential. A situation highlighted by the unchanged Chinese Loan Prime Rates this morning. That has anchored regional Asian currencies as well, with their high beta to China. I continue to expect regional Asia, ex Indonesia, to outperform versus G-10 currencies.

The final US presidential debate has been confirmed for 0900 SGT on Friday morning. The debate will provide a welcome distraction to the street’s US fiscal stimulus negotiations. Whatever the outcome of these talks, there will probably be a profit-taking sell-off or a deal failure sell-off in equity markets, in particular. This should translate into gains for the US dollar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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