Dollar Steadies Amidst Virus Spread and Stimulus Uncertainty 

  • The dollar steadied on Monday, as surging coronavirus cases in Europe and the United states and a lack of progress toward a U.S. stimulus put traders in an uncertain mood. 

    The dollar traded against a basket of currencies between steady and a little firmer in Asia sessions hovering around the average range it has held for months. 

    U.S. House Speaker Nancy Pelosi said on Sunday that she expected a White House response on Monday regarding the latest stimulus spending plan – but there have been a few tangible signs that a long-stalled deal is actually nearer. 

    “The combination of receding hopes for a pre-election fiscal deal and the news on COVID and potentially stricter lockdowns is enough to take a bite out of the stock market,” said Ray Attrill, head of FX strategy at National Australia Bank. 

    He said a dip in S&P 500 futures had spilled over into currency markets, where traders are also in a cautious mood ahead of the U.S. election on Nov. 3. 

    Analysts reckon that a Joe Biden victory next week, would likely damage the dollar due to the large U.S. stimulus package. 

    “There’s nothing to suggest that Biden’s poll gap is narrowing, but you can expect that the risk tone can become a bit more cautious as we get closer to next Tuesday,” Attrill said from Sydney. 

    “But against that, there is a view that I would concur with, that if by the middle of next week we have got a clean Biden win … the short-term reaction to that will be very risk positive and U.S. dollar negative.” 

    Later on, Monday, investors will follow a German sentiment survey at 0900 GMT, following a robust Purchasing Manager’s Index figure last week, and U.S. housing data, due at 1400 GMT. 

     

    TECHNICAL OUTLOOK 

     

     

     

    In the daily charts of GBP/USD, the pair edged lower early Monday morning in Sydney session.  

    The uncertainty in the market of U.S. dollar has kept traders on their toes since this morning. As the U.S. Presidential Elections are fast approaching, the direction of the dollar is getting harder and harder to predict. 

    With analysts saying that a Joe Biden victory will damage the dollar, will this sentiment affect the market days ahead of the elections?  

    As what we can see in the charts, the pair is still trading inside the area of support and resistance levels. The uncertainty in the U.S. dollar has pushed the dollar higher and further pushing the sterling lower. 

    With the resurgence of COVID-19 in the UK and other Euro areas, will the sterling head lower in the following days or will the Brexit negotiations help the sterling back up?  

     

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