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Dollar Edges Higher; Sterling Expects Brexit Progress By



© Reuters.

By Peter Nurse – The dollar edged higher in early European trade Thursday on safe haven inflows as coronavirus cases continue to mount and the idea of pre-election stimulus in the U.S. is officially consigned to the trash.

At 2:55 AM ET (0655 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 93.483. 

Elsewhere, was down 0.1% at 1.1740, while was up 0.1% at 105.28. The risk-sensitive dropped 0.7% to a one-week low of 0.7110, weighed by Australia’s central bank chief hinting at a possible rate cut or bond buying.

The French government on Wednesday declared a public health state of emergency as the increase of coronavirus cases in the country reached worrying levels. 

France is just one of a number of countries battling a second wave of the Covid-19 virus, with new cases hitting 100,000 daily in Europe, and governments are having to make tough decisions on localized lockdowns.

This comes as U.S. stimulus plans appear to fatally bogged down, as far as having a timeline ahead of the elections in early November is concerned.

“Getting something done before the election and executing on that would be difficult,” U.S. Treasury Secretary Steven Mnuchin said on Wednesday, adding that he and Democrat House Speaker Nancy Pelosi are still “far apart” on their spending priorities.

Delay has supported the dollar for a few weeks, by weighing on investors’ sentiment and boosting demand for safer assets.

That said, many traders are now looking past the election, with the polls increasingly suggesting a victory for the Democrat candidate Joe Biden.

“We think a Democratic ‘Blue Wave’ would be good for risk and bad for the dollar in 2021 – but clearly many things have to fall into place, not least Covid-19 second waves remaining contained at local levels,” said analysts at ING, in a research note.

“We favour a continued period of consolidation in FX markets over the next month. That should see EUR/USD trading in a 1.17-1.20 range. Thereafter our preference remains for a rally to 1.25 throughout 2021 as clarity emerges on a potential Biden White House and what it means for a return to a rules-based trading system,” ING added.

Elsewhere, traded largely unchanged at 1.3006, remaining near the key 1.30 level with the European Union and Britain now expected to prolong Brexit talks past a mid-October deadline to try to overcome a few tricky issues holding up a new trade agreement.

European Union leaders are set to meet in Brussels later Thursday to discuss progress in the Brexit discussions. 

Although the two sides retain differences on the three key issues of fisheries, fair competition and methods of solving disputes, with cable around 1.30, the forex market seems to expect progress in the near future.

“Given the rising concerns of COVID 19 into a cold and wet European winter, the last thing either side need, but more so the UK, is a move to WTO tariffs,” said Chris Weston, head of research at broker Pepperstone, in a Reuters report. “The prospect of a Free Trade Agreement, therefore, seems high.”


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British Pound Under Pressure as Brexit Talks Beleaguer UK & EU Officials




2020 Election, Brexit, British Pound, US Presidential Debate, Coronavirus – Talking Points

  • British Pound volatility could swell as Brexit talks intensify
  • UK-EU divorce talks may push EUR/GBP out of downtrend
  • Third presidential debate up next: why does this one matter?

Brexit: When Will it End?

The British Pound continues to be suspended in a fog of uncertainty as EU and UK policymakers attempt to hammer out the details of an agreement. As I’ve written before, fisheries are a major point of contention that have contributed to the impasse. EU chief negotiator Michel Barnier said bilateral talks will intensify this week so a deal can be reached.

Having said that, his UK counterpart David Frost agreed to hold constructive talks but noted in a tweet that “the EU still needs to make a fundamental change in approach to the talks”. Needless to say, prolonged uncertainty and growing premonitions about a no-deal scenario may pressure Sterling. This week, GBP has the second-highest implied volatility against the US Dollar among its G10 peers, right under the petroleum-linked Norwegian Krone.

Political Volatility Impacting British Pound

British Pound Under Pressure as Brexit Talks Beleaguer UK & EU Officials

Source: Bloomberg

Given the immense political volatility of the situation, it makes forecasting the British Pound’s movements against its counterparts even more difficult. Due to the erratic developments associated with Brexit – and Sterling’s price action tied to it – breaking news on the EU-UK divorce would likely elicit a strong reaction out of GBP, making it difficult to employ technical analysis. With that in mind, a pattern appears to have formed.

EUR/GBP Price Outlook

EUR/GBP has been trading below sharp descending resistance after topping in early September at a multi-month high at 0.9258. The pair may attempt to break out of the downtrend, which if successful could be met with an aggressive buying bout if it signals the start of a short-term recovery. Having said that, EUR/GBP may cap its gain at stubborn resistance at 0.9190.

EUR/GBP – Daily Chart

British Pound Under Pressure as Brexit Talks Beleaguer UK & EU Officials

EUR/GBP chart created using TradingView

Conversely, if the pair is rejected at the slope of depreciation, then the pair may challenge the floor at 0.8974. If that cracks under the weight of swelling selling pressure, it may open the door to retesting critical support at 0.8863. To get more technical updates, be sure to follow me on Twitter @ZabelinDimitri.

Third Presidential Debate and the Election

As mentioned in previous article, the third and final presidential debate – which in reality is the second after it was cancelled – will be occurring on October 22. You can read more about the details in my outline here. The main takeaway is to see how the debate affects polling data and in turn how it and if at all it elicits a market reaction.

While debates have historically not impacted voters’ intentions, the first presidential debate subsequently led to Democratic nominee Joe Biden rising in the polls while incumbent President Donald Trump fell.

This appeared to reinforce the narrative that the former Vice President will take the White House. Having said that, if the 2016 election taught us anything, it’s that the only thing you can be certain of is uncertainty.

— Written by Dimitri Zabelin, Currency Analyst for

To contact Dimitri, use the comments section below or@ZabelinDimitrion Twitter

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USD/MXN Buckles Below Key Support




Mexican Peso Technical Price Outlook: USD/MXN Near-term Trade Levels

  • Mexican Peso updated technical trade levels – Daily & Intraday Charts
  • USD/MXN breakdown sets weekly opening-range just below key pivot zone at 21.2316/2942
  • Key near-term support 20.6789 – Bearish invalidation at monthly-open resistance

The US Dollar is down more than 0.4% against the Mexican Peso into the start of the week after breaking below a key pivot zone on Friday. A well-defined descending technical pattern leaves USD/MXN vulnerable to further losses near-term with the immediate focus on a break of the weekly opening-range for guidance. These are the updated targets and invalidation levels that matter on the USD/MXN technical price charts. Review my latest Strategy Webinar for an in-depth breakdown of this Peso setup and more.

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Mexican Peso Price Chart – USD/MXN Daily

Mexican Peso Price Chart - USD/MXN Daily - Dollar vs Peso Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; USD/MXN on Tradingview

Technical Outlook: In my last Mexican Peso Price Outlook we noted that the USD/MXN sell-off was, “testing a break of a key pivot zone we’ve been tracking at 21.2316/2942 – from a trading standpoint, the risk remains tilted to the downside while within this formation.” Price slipped below this threshold on Friday with the USD/MXN testing this zone as resistance over the past few days.

Daily support objectives remain unchanged at the 1.618% Fibonacci extension of the decline off the June highs at 20.6788 backed by the 78.6% retracement of the yearly range at 20.0752. A pivot / close back above 21.2942 would risk a larger rebound towards trendline resistance with bearish invalidation now lowered to the objective October open at 22.0895.

Mexican Peso Price Chart – USD/MXN 120min

Mexican Peso Price Chart - USD/MXN 120min - Dollar vs Peso Trade Outlook - Technical Forecast

Notes: A closer look at Peso price action shows USD/MXN trading within the confines of an descending pitchfork formation extending off the late-September highs with the pair rebounding off median-line support on Monday. The weekly opening-range is set just below the 21.2316-2942resistance zone and we’re looking for the break to offer guidance. A break lower keeps the focus on the September low at 20.8377 and 20.6788. A topside breach of the weekly range would risk a larger price recovery with such a scenario exposing the 61.8% retracement at 21.5489 and daily slope resistance near ~21.8500.

USD Forecast

USD Forecast

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Bottom line: The USD/MXN has broken below a key pivot zone but the follow-though looks a bit tired here. Look for topside exhaustion while within this near-term formation with a break lower here keeping the focus objectives into the lower parallels. Ultimately a larger sell-off may offer more favorable opportunities with a breach above the monthly open still needed to shift the broader focus higher again.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Key US / Mexico Data Releases

US / Mexico Data Releases - USD/MXN Economic Calendar - Key Event Risk Ahead

Economic Calendarlatest economic developments and upcoming event risk.

Active Technical Setups

— Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex

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Gold Price Forecast: XAU Bulls Tempt Breakout




Gold Price Forecast:

  • Gold prices are pushing above a key resistance level of 1920 today.
  • Gold prices have been in digestion mode for two-and-a-half months, coming in stark contrast to the bullish mania that drove prices from mid-June and through July.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

Gold prices have been in digestion mode for two-and-a-half months now. It might be hard to believe if we go back to early-August, when Gold prices were showing hints of a mania on their way up to fresh all-time-highs. Perhaps what was most remarkable about that move was just how incredibly one-sided it was from late-June and through July. Gold prices took out a number of key resistance levels along the way; but this was a pretty clear example of a trending state in a cyclical market.

That fresh all-time-high soon showed a bearish signal on August 7th. As written in the Gold Technical Forecast for that week, the Friday bar responding to that fresh all-time-high closed as a bearish engulfing pattern; and then the next week brought on a retracement of more than $200 as bulls bailed and prices tried to equalize.

To learn more about bearish engulfing patterns, check out our DailyFX Education section.

Gold Price Daily Chart

Gold Daily Price Chart

Chart prepared by James Stanley; Gold on Tradingview

That retracement found a bit of support at a confluent spot on the chart but, bulls weren’t yet ready to continue the move. As a matter of fact, we still might be in that spot where bulls aren’t yet ready to continue as the past two-and-a-half months have brought on a continued case of digestion in Gold prices.

Gold Forecast

Gold Forecast

Recommended by James Stanley

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This digestion has taken on the form of a falling wedge pattern; and given the context, that falling wedge is taking on similar tonalities as a bull flag formation. Falling wedges and bull flags will both often be approached with a bullish aim, looking for buyers to re-take control after digestion of a recent and fresh high.

This also wouldn’t be the first time that Gold prices have went on an extended bout of digestion in this recent bullish cycle: Similar instances happened in February-May of last year; and then again from September-December of last year. Each of those digestion themes took months to reconcile; with bulls eventually winning-out and continuing to drive the topside theme.

To learn more about falling wedges or bull flags, check out our DailyFX Education section.

Gold Price Weekly Chart: Months Long Digestion in Falling Wedges

Gold Weekly Price Chart

Chart prepared by James Stanley; Gold on Tradingview

The big question at this point is whether bulls are taking the reigns again. Price action is testing above the resistance trendline making up the falling wedge formation, and prices are currently holding above a very key price on the chart at 1920. That level was the all-time-high for more than seven years before being taken out by a surging trend in the month of July. It has since caught multiple resistance inflections as this digestion has continued and, may eventually be repurposed for higher-low support when buyers do eventually re-take control of the matter.

Top Trading Opportunities in 2020

Top Trading Opportunities in 2020

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At this point, the line in the sand of interest appears to be around 1933, which is the current monthly high. A breach above that exposes a Fibonacci level at 1943.41; and a test there opens the door for higher-low support around the 1920 level.

Gold bulls should continue to exercise caution, however, until that new monthly high comes into play. A similar situation presented itself a couple of weeks ago – with bulls bursting above 1920 only for prices to fall back into the prior range.

Gold Price Four-Hour Chart

Gold Four Hour Price Chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Strategist for

Contact and follow James on Twitter: @JStanleyFX

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