The Week Ahead: Take It Or Leave It

GBPCHF Consolidates as Brexit Deadline Looms

Pressure mounts as Brexit negotiations go into its crucial week. A deal must be reached by the end of November so the EU could pass it into legislation before the end of the transition period in January.

The European Council is scheduled to discuss the divorce on Thursday, and an agreement, or the lack of it, could turn the market upside down. There is still a risk of another breakdown and it would not be surprising to see an extension to the deadline.

In this case, the Sterling could give back its recent gains. The pound has fallen back from the previous high of 1.2200. 1.1600 is the lower band of the consolidation range.

USDCAD Recovers on Profit-Taking

The US dollar has bounced back from its 10-month low as sellers took some chips off the table. The election-themed USD trade might be over as Biden cemented his victory with a flip in Arizona.

Investors have shifted their attention to the readiness of the vaccine after a preliminary surge of enthusiasm. More positive headlines would mean global trade could resume sooner which would favour the commodity-linked loonie.

In the meantime, this week’s inflation and retail sales may offer intraday volatility. The US dollar is rallying towards the resistance of 1.3370, while ast January’s low of 1.2960 is a critical support to monitor.

EURNZD Tanks as RBNZ Downplays Negative Rates

The New Zealand dollar saw a surge in buying interest after a rather hawkish outlook from RBNZ’s meeting last week.

Recognising latest positive development in the economy, the central bank has lifted its interest rate forecast from its statement back in August. This revision means that policymakers would most likely steer away from the much-anticipated negative rates.

As markets price in the bullish U-turn, the kiwi may continue to gain traction as short sides cover their positions. The euro has broken below July’s low of 1.7170, and the sell-off may extend towards 1.67. On the upside, 1.7700 is the immediate resistance level.

AUDJPY Rises as Sentiment Improves

Following the announcement of progress in the Covid-19 vaccine, market optimism has propelled the Australian dollar to recent highs across the board.

As risk-on sentiment brews, the contrast cannot be sharper between a growth-sensitive aussie and a safe haven Japanese yen. The former may not suffer from Reserve Bank’s expanded QE programme since loose monetary policy has become the norm elsewhere.

Its proximity to China’s recovery, however, may help it stand out as demand in commodities picks up again. The pair has rallied above the resistance of 76.50 with the September high of 78.40 as the next target.