FX Outlook: Analysis USD/CAD & USD/CHF
Forex Markets and a Rally in Risk on COVID Vaccine News
10/11
Stock-index futures were already on the rise after Democrat Joe Biden was projected winner of last week’s presidential election over the weekend — all but eliminating one source of uncertainty. Then, Pfizer Inc. and BioNTech early Monday reported what was definitively good news on their COVID-19 vaccine, and a textbook example of a “risk-on” rally was underway.” (Marketwatch)
The election is still a source of uncertainty and the vaccine is no quick fix while we did see a rally in risk the USD, The DXY( Which measures the USD against a basket of currencies on the chart below) it remains above the key 92.00 level. As per previous posts, we think the USD will shortly have a major rally. We looked at EUR/USD and the 1.1900 level held the rally and, in this report, we will look at 2 other USD pairs USD/CAD and USD/CHF.
The Vaccine is not a quick fix to the pandemic: “The trials can tell you if a vaccine is clinically safe and if it’s effective at protecting an individual from the disease. What we cannot know, until we have vaccinated a significant proportion of the population, is how much it stops the transmission of the disease.”(Dr. Raph Peterson)
Questions that need to be kept in mind are how long does immunity last, does the vaccine work as well in high-risk elderly people, does it stop you from spreading the virus or just from developing symptoms?
Then there is the enormous task of manufacturing enough doses and then immunizing hundreds of millions of people around the world is a monumental challenge that could take a year or more. Also, how long will the global economy take to recover to growth above pre-pandemic levels – probably a few years.
In terms of the US elections Biden’s win is being contested by the Trump administration and Yesterday U.S. Attorney General William Barr told federal prosecutors to look into any “substantial” allegations of voting irregularities so we don’t have a conclusion yet. The USD is oversold and we expect it to shortly mount a broad based rally.
Technical Analysis USD/CAD USD/CHF
Dollar Index DXY: We have bounced from the bottom of the channel; speculators are heavily short, and we expect a move to 94.50 (the top of the channel) with a possible run on up to 96.00.
USD/CAD Daily: The USD traded through 1.300 level yesterday while today we moved back up to trade above the 1.300 level. We view yesterday’s candle tail as exhaustion of selling – We now expect the USD If it moves up through yesterday’s open to follow through up to the 1.3400 level.
USD/CHF Daily Chart: The USD has rallied back strongly after trading just below the 0.900 level. We now expect a move up through the 0.9200 level to follow through to resistance levels indicated. Speculators hold a 10 year high in terms of short positions and this points to a major rally
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