Trading Currencies: Not All One Way (But Close)

It’s interesting how strong ‘risk-on’ trading has been over the past 3 to 4 weeks. The US dollar basket since the first Presidential debate has almost been in a downward linear trend that suggests the market is actually backing a change of administration at the White House.

Today (Oct. 15) was originally scheduled for the second US presidential debate in Miami, but it was cancelled after President Donald Trump said he refused to participate. Final round will be held at Belmont University in Nashville on Oct. 22.

DXY since September 28:

However, there are a few issues outside of the US election that are creeping into the trades.

AUD/USD – Challenging relationship with China

AUD/USD had been pretty steady around $0.7210 for a little while. However, news that China might be looking to freeze imports of coal from Australia broke the trend and knocked the pair to $0.7175.

Australian Treasurer Josh Frydenberg said in a conference this week that the linkages between China and Australia in terms of coal import are vitally important to the country, yet the relationship is mutually beneficial as well.

Australia’s economy has performed rather well through the COVID crisis and is likely to remain one of the better performing economies in the coming 12 months.

EUR/USD – Second wave is making a heavy comeback

EUR/USD is also coming under pressure as the second wave in Europe builds to levels not seen since the March peak with Italy’s active cases rising to 5,901 from 4,619, France now has 21,329 active cases while the Netherlands announced a partial lockdown by closing bars, restaurants and cafes from Wednesday as its active case start to impact hospitalisations. All this has seen EUR/USD down to $1.1743, a 65-pip fall, in 24 hours and is showing further weakness.

GBP/USD – Records highest daily rise of COVID cases since March

GBP/USD is suffering from the same issue as the UK’s second wave sees a new tiered lockdown structure. Currently there are 17,234 active cases, however it’s the fact that cases are now growing at a rate not seen since March that has GBP/USD on edge (~5000 cases a day). Hospitalisations stand at 3,905 but that number is sure to increase. GBP/USD fell 1% to $1.2935 and will likely fall further if numbers continue to spiral and/or lockdowns get stronger.

Vaccine news could drive the market

Given the fact that COVID is still impacting the market prices as the recent surge of cases has become increasingly worrying, headlines that evolve around the vaccine progress are likely to move the market prices dramatically. Just earlier this week when Johnson and Johnson paused its coronavirus vaccine trials after a participant experienced an unexplained illness, EUR/USD slipped below 1.18 and US stocks edged lower. Volatility will continue to be high in the coming weeks. Stay alert on news and manage your positions with risk management tools.

This article is prepared by Lucia Han from Mitrade and is for reference only. We do not represent that the material provided here is accurate, current or complete. The article content neither takes into account your personal investment objects nor your financial situation, and therefore it should not be relied upon as such. You should seek for your own advice.