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Mid Week Update - USD Strong with NFP Looming - 2 Sep 2020

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Mid Week Update

We’ve seen a bit of a rally for the dollar over the last couple of sessions after relentless downwards
pressure for the last week. The Fed had given the market the nod to hit the greenback at the Jackson
Hole forum and it took the invitation with both hands.

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NFP Looms On The Horizon

Traders are now assessing the market to see if
we’ve priced in enough from the dovish Fed or if we’re just taking a break before the next leg. As
usual currency traders are closely watching the rates market and rates traders are closely watching
the currencies.
It does feel like we may be moving into a new sector of ‘Corona Trading’ as the market may now look to data to back up moves that we’ve seen on presumed Covid numbers and their potential impact on individual economies. This should bring opportunities for currency traders over the next few months as regional recoveries vary and impact size differs.

Aussie Dollar
 The Aussie has fallen back from recent highs above 0.7400 on the back of a slightly better
bid greenback and action from China against Australian goods as well as a worse than
expected print on the GDP data. The focus will remain on those Sino-Australian relations in
the short term as well as the overall fate of the ‘big dollar’.

Kiwi Dollar
 The Kiwi has remained well bid despite the fall of it’s cross Tasman cousin and this was
helped by comments out earlier from Orr. There does seem to be some good flow hitting the
market in the cross which has helped with it’s strength but if we continue to see dollar
strength over the next few sessions expect the flightless bird to lose it’s wings.

 The Euro eventually took out sizeable option barriers at 1.2000 overnight and it fell quite
sharply over the session. Traders will continue to look at Covid outbreaks on the continent
for short term direction in the coming days, but also the NFP’s on Friday may give us it’s
medium term direction.

 In line with the other majors, Cable has fallen back off its recent highs, but we’re set to hear
from Governor Bailey later today and as usual with the pound expect some sharp moves
over the next few sessions.

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