USDCAD and US 500 Index

The market is consolidating again this morning after another week of indecisive trading. The rollercoaster trading in 2020 is almost at an end but there be one or two more twists and turns as we close out the year. Many states in the US are to certify their Presidential election winners over the next few days. Notably, the state of Georgia is expected to certify Joe Biden as having won its Presidential Election today, followed by certification of Michigan and Pennsylvania on Monday. The state of Georgia completed its recount which confirmed Biden as the winner. The recount was demanded by the Trump campaign that cited irregularities as casting a shadow over the result. There is still a 48 hour window after certification for another recount to de called for. The contested nature of the results has led to uncertainty and volatile trading in markets. Biden has sad that he has not ruled out legal action against the Trump administration; over the GSA transition delay to certify the results. There is also conflict between the FED and the US Treasury as Treasury Secretary Mnuchin requested that the FED return all of the unused CARES Act funds that were part of the emergency lending programs, before the end of the year. Mnuchin said that this will allow congress to re-use $455B but will halt the FED’s corporate credit program, municipal lending and the Main Street Lending Program on 31 December. Unemployment Benefits to 12M people will also end on that date. The FED has responded by saying that, “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy”. Treasury Secretary Mnuchin said that he hopes the funds can be used for grants and not debt. FED Member Bostic said that he was a bit surprised by the Treasury’s decision. He added that, “given where economy is, would be prudent to keep emergency facilities open” and “uncertainty has kept people from engaging in economy”. He said that it looks like it would be well into 2021 until equilibrium was achieved. Bostic also said that emergency lending tools have been helpful and the presence of those tools and facilities gave people confidence even if they were not used. He added that if this is taken away it will leave people at risk. He added that the best way to move forward was to have fiscal and monetary policies moving in the same direction. He noted that many temporary job loss have converted to permanent losses which shows weakness and when households burn through their savings, it will signal a tipping point requiring more FED engagement. On the vaccine front Pfizer is expected to file an FDA application for their vaccine today. Meanwhile the WHO has said that Gilead’s Remdesvir should not be given to hospitalised patients with Covid-19 regardless of how ill they are and has recommended against its use. The WHO has said that it provides no improvement for survival and it does not reduce the need for ventilation. The Japanese 225 has closed lower by -0.42% in today’s session. The Hang Seng is trading up 0.3%. The Shanghai Composite is trading up by 0.4%. Gold is trading lower at 1864.00 while USDJPY is trading at 103.870.

Once again ECB President Lagarde is due to speak this morning at an online event hosted by the European Banking Congress. In the afternoon, US FOMC Member Kaplan is due to speak about energy and the economy at a conference hosted by Federal Reserve Bank of Dallas. European Consumer Confidence is expected to fall to -18 from -16. Canadian Retail Sales are expected to half from 0.4 to 0.2.


The USDCAD pair is now trading around the 1.3069 level having fallen back from the March high of 1.4668 and found supports around 1.3000. The pair found support last week at 1.3080 and is back testing this area after the low at 1.2928. Resistance may be seen at 1.3180 followed by 1.3200 and 1.3250. Above the 1.3300 level, resistance is being seen at 1.3389 and 1.3400 followed by the 1.3420 area. The 1.3500 may provide resistance ahead of the 1.3600 level. Further resistance may be seen at the 1.3646 lower high, the 1.3670/1.3686 area followed by the 1.3700 level and the 1.3750 zone of consolidation from late May. The 1.3860 former area of support may now be resistive ahead of 1.1400. The chart contains potential resistance at the 1.4100 round number followed by 1.4141, 1.4180, the 1.4250 area and 1.4298/1.4300 zone. The previous lower high formed at 1.4173 and this may also provide a level to lean against, with a breakout targeting the 1.4400 level. Beyond this the 1.4424 level is followed by 1.4500 and 1.4560. The high created at 1.4660 represents the resistance level to beat, followed by potential resistance at the 1.4700 level. The next area may prove to be resistive at 1.4750. Beyond this the 1.4800 area may also create an interest for traders. A break above these levels might seek to test 1.4900. Beyond this the 1.4950 level comes into play followed by 1.5000.

Support for the pair was tested around the 1.3000 area after priced failed to remain above the 1.3200 level. The low was found at 1.2928. The 1.3150 area may be used as potential support ahead of the 1.3100 round number. The 1.3034 area has also been used as support in January ahead of the large round number at 1.3000 and these levels are combining to form a zone that is attracting interest from traders. Traders may potentially lean on this area followed by the 1.2953 level and the 1.2928 low, if the round number is broken, with further selling potentially opening the way to 1.2900, 1.2800 and 1.2750.

US 500 Index

The US 500 Index price is currently trading around the 3565.00 area and has potentially strong resistance at the 3600.00 round number. The 3580.00 area may also be resistive but a break above yesterday’s high of 3585.00 opens the way for a test on 3588.00. The 3547.00 area may provide support along with 3550.00 as last month’s high. Further resistance may be found around the 3573.00 area, followed by 3590.00 and the 3600.00 round number. A break higher may see to engage the 3620.00 area following a break of the 3645.00 area. The high at 3674.00 hold the key to higher levels. The chart shows that price is consolidating in a wide range forming lower highs and higher lows. As price is at the top of the range sellers may emerge as the broader political and economic picture remains uncertain.

Support may also come into play around 3480.00 and 3450.00 in the event of a deeper selloff from 3500.00 and 3550.00. Below these levels 3400.00 is followed by 3344.00 and 3311.00. These levels are in turn followed by the 3300.00 area, the 3233.00 higher low level, and the 3200.00 round number area. The 3166.00 level may be supportive followed by the 3115.00 level and 3100.00. The 3070.00 area has been used as support and this is followed by further potential supports at 3061.00, 3044.00 and the 3017.00 level. The round number 3000.00 area may also offer support followed by the 2980.00 and 2950.00 levels. The 2908.00/2900.00 area may be used as a higher low in the event of a pullback. Further support may be found in the 2860.00/2850.00 area, followed by the 2820.00 area and the 2800.00 round number. Below these levels the 2750.00 area is followed by 2725.00 ahead of the 2700.00 round number. The 2645.00 area may also provide support to price action followed by the 2500.00 area and the April low at 2240.00/2437.00. The 2400.00 level is followed by potential support at 2345.00. Below these levels the 2300.00 area and the low at 2275.00 may potentially be used by buyers. The 2250.00 level might follow as potential support and this is in turn followed by the 2200.00 round number. Below this the 2120.00 may be used as support followed by the 2100.00 area. The 2000.00 area could possibly see buyers attempt to enter the market in the event of another selloff.

Philip Konchar


Core Spreads

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