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USD major downtrend intact post ECB meeting

USD major downtrend intact post ECB meeting

Mix performances for the major US benchmark stock indices with stellar gain seen again in domestically oriented small cap stocks; Russell 2000 +1.1% (1922) to notch another fresh all-time closing high while the technology heavy Nasdaq 100 had managed to recover some lost ground from Wednesday’s decline to close with a positive gain of +0.3% (12401), much thanks to Apple’s rally of +1.2% (123.24). The S&P 500 -0.03% (3668) and Dow Jones Industrial -0.2% (29999) closed in the red with minor losses.

Yesterday’s weekly initial jobless claims had painted a soft and weakening jobs market in the US with claims increased by 137,000 to 853,000 (above consensus of 720,000) to reach the highest level since the week of September. 18. This disappointing unemployment data can be viewed in a positive angle to incentivise Congress to stop all the bickering/brinkmanship to reach an agreement on the much needed additional fiscal stimulus package before the December recess in two weeks’ time.

Over to the foreign exchange market, the ECB unleashed another monetary pumping stimulus of EUR500 billion in bond-buying programme to prevent the euro zone from a possible double-dip recession. However, ECB’s dovishness was quite restrained as ECB President Christine Lagarde commented that ECB may not deploy all the new firepower that supported to EUR/USD exchange rate above the 1.2060 and posted a gain of +55 pips to end yesterday’s US session at 1.2134.

On the other hand the GBP/USD slipped by -107 pips to close at 1.3293 as Brexit trade deal negotiation talks remained stuck without a compromise as the deadline drew closer. In addition, UK Prime Minster Boris Johnson commented that a no-deal Brexit is now a “strong possibility” after three-hour long summit with European commission chief, Ursula von der Leyen that failed to bridge major gaps. Overall, the USD remained on a weak footing against the major currencies with the USD Dollar Index slipped by -0.3% (90.82) that had almost erased all of the recovery play seen from last Friday, December 4 low of 90.47. Interestingly, the growth proxy AUD continued to be an outperformer with the AUD/USD advanced by 94 pips to close yesterday’s US session at 0.7536, close to a 1.5 year high since June 2018 as market participants continue to anticipate more stimulus (fiscal & monetary) from US plus a burst of pent-up global demand for goods and services with more positive developments on COVID-19 vaccines on the horizon.

Chart of the day – AUD/USD

End of a 9-year secular bearish trend for AUD/USD?

Source: CMC Markets platform


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