Market News and Charts for November 04, 2020
Hey traders! Below are the latest forex chart updates for Wednesday’s sessions. Learn from the provided analysis and apply the recommended positions to your next move. Good day and Good Luck!
The pair will continue to move lower in the following days towards its March-May low. The EU member states and the EU bloc posted disappointing Composite and Services PMI reports on Wednesday, November 04. The figures for the European Union were 50.0 points and 46.9 points, Germany at 55.0 points and 49.5 points, and France for 47.5 points and 46.5 points, respectively. Meanwhile, the coronavirus hit economy of Italy recorded 49.2 points and 46.7 points. This means that only 2 out of 8 reports turned out to be positive, which contrasted with the better-than-expected Manufacturing PMI results last week. The resurgence of COVID-19 could also threaten the advances made in Q3 as most European countries began to impose restrictions once again. Despite losing its edge as a safe haven against the US dollar and the Japanese yen, the Swiss franc will still advance against the single currency as investors warn of a more severe economy in Q4.
The pair broke out from an uptrend channel support line, sending the pair lower. Among all the EU member states who posted their Composite and Services PMI reports on Wednesday, November 04, only the United Kingdom posted positive figures for both reports. The numbers were 52.1 points and 51.4 points, respectively. Investors were seen bullish on the British pound ahead of the official withdrawal of the UK from the bloc on January 01, 2021. This was despite the high chance of the UK leaving the bloc without a deal. Economists anticipated that a no deal Brexit could result in the UK losing around $25 billion in 2021 or almost twice than its annual contribution to the EU budget in 2018. Despite being the second largest contributor to the budget, however, the UK only receives a partial of this amount for its own economy. This means that a no-deal Brexit will be beneficial for the UK in the long run.
The pair failed to break out from a downtrend channel resistance line and broke down from its support line. The upbeat outlook on the Japanese economy and the lower expectations with the EU is pushing the pair lower. Europe is emerging once again as the epicenter of the coronavirus pandemic. Since October, the new cases of COVID-19 have been continuously rising with the last two (2) weeks of October witnessing the record-breaking daily infection count on European countries. On the other hand, Japan already flattened its COVID-19 cases with daily infections of between 300 and 750. It had its second wave last August to as high as 2,000 per day. This, in turn, had prompted the Bank of Japan (BOJ) to cut their 2020 outlook from -4.7% decline to -5.5%. However, the central bank more than doubled its 2021 forecast from 1.6% to 3.6%. Analysts are now expecting Q3 2020 to expand by 18.4% from a decline of 28.1% in the second quarter.
The pair has been trading in a range since September and is expected to rally in the coming months. The greenback has lost some substantial value since March due to COVID-19 and the uncertainty surrounding the elections. With the 2020 US Presidential Elections now coming to an end, the outlook for the US economy will become clearer. In addition to that, major reports have been pointing to a robust recovery in the largest economy in the world. US GDP for the third quarter of the fiscal year jumped by 33.1% from a slump of 31.4% in Q2. Other major economies like Germany and Japan, on the other hand, have published and will be reporting a Q3 figure lower than the previous quarter. In Germany, the economy expanded by 8.2% from a 9.8% decline. Meanwhile, Japan is expected to grow by 18.4% on an annualized basis compared to its second quarter 2020 economic contraction of 28.1%.
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