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Even if the greenback continues to try to defend its gains against the frac, the USDCHF pair is still bound to reach its support levels by late December or early January. The pair is heavily weighed by pessimism surrounding the US-China trade war. The broader weakness of the US dollar comes along as the US Federal Reserve continues to inflate its balance sheet at an impressively fast pace. Greenback investors are struggling to find a clear direction for the currency as the currency receives both good and bad news from its economic activities and trade war updates – for instance, the US manufacturing PMI unexpectedly contracts in December, while the market composite PMI improves. As evident in its rally, the Swiss franc still has the upper hand against it despite the partial agreement last week. So, unless there is significant or concrete progress between the two, the franc will continue to drag the US dollar lower in the coming sessions.
The US dollar may not have good luck against European currencies, it’s still able to rally against Asian currencies like the Indian rupee. It will be a rough and long climb to its resistance, but the improvements in the US-China trade war is buoying the US dollar against the Indian rupee in sessions. The Indian rupee lost its grip on its weekly gains against the buck, and soon, it is expected to lose its monthly gains against it. A factor that greatly contributes to the rupee’s weakness is the signs pointing to another possible rate cut from the Reserve Bank of India. Yesterday, RBI Governor Shaktikanta Das said that the reserve bank is ahead of the curve in anticipating a slowdown. This has also prompted its previous rate cuts from earlier this year. Since February, the RBI’s Monetary Policy Committee has slashed approximately 135 basis points to its official repo rate, trimming it down to 5.15%.
Oddly enough, despite the massive win of the Conservatives and British Prime Minister Boris Johnson last week in the UK elections, the GBPBRL pair still didn’t receive a massive upward jolt. Perhaps the fondness of traders for the Brazilian real is bolstering the currency in sessions even against the pound, a powerhouse in the forex market these past few sessions. The GBPBRL is on its monthly lows as of today, and fortunately for bears, the momentum is expected to last in the medium-term run. Perhaps, what’s running the pair are the alarming low figures from Britain’s economic activity. Yesterday, the country produced weak numbers in its composite PMI, manufacturing PMI, and services PMI. And then earlier today, the kingdom’s average earning index for October went down lower than what was expected while its claimant account changes unexpectedly spiked in November according to the British Office for National Statistics.
The GBPAUD is defying every odd and fundamental as it currently contracts in trading sessions. But despite today’s contraction, the chances for bears to continue the downward momentum are slim. The main cause for today’s drop is the revived political tensions in the United Kingdom and the fresh Brexit concerns just right after the elections. Investors still worry whether Johnson will agree to another extension from the bloc. Still, the pair is suspected to continue to climb up further away from its support in sessions, and it is also expected that the pair will have a steep uphill climb as soon as January kicks in. It is crucial that the British Prime Minister and his government delivers their Brexit promise before the first month of 2020 ends. Brexit will most likely happen before February, but the transitional period for both parties is due to complete only by the end of the year, or on December 31, 2020.