Narrative Tug of War Between COVID Vaccine and COVID Cases

EUR/USD, USD/JPY Price Analysis & News

  • Vaccine Hopes vs COVID Concerns
  • EUR/USD Tracks Higher on Cross-Related EUR/GBP Buying
  • JPY Recovers Slightly
  • USD/JPY Risks on the Upside Amid Higher Yields and Equities

Vaccine Hopes vs COVID Concerns

The tug of war between vaccine optimism and COVID concerns as to what is the more dominant narrative sees major FX pairs in limbo. Besides some modest firming in the Euro the rest of the G10 have been trading relatively flat. Pfizer’s vaccine breakthrough has raised hopes that others may see similar results, most notably Moderna, who stated yesterday that it has enough data for a first interim analysis of COVID vaccine. While the company has not given an exact time as to when the results will be released, Dr Fauci has said however, that the data could be announced within the next couple of days. To that end, market sensitivity to further vaccine updates is likely to remain high amid hopes of a quicker distribution of a COVID vaccine from several providers.

FX Majors 1-Day % Change

EUR: Broad based gains for the Euro, with EUR/USD supported by cross-related flows in EUR/GBP. Topside resistance in the EUR/USD sits at 1.1820-25, where a break above opens the door to 1.1870-75. Failure to overcome initial resistance puts focus back on 1.1755-60. Elsewhere, declines in EUR/GBP had been curbed at the September lows with the cross back in the mid-89s While a deal can see the cross return to 0.87, with current negotiations set to miss yet another deadline (Nov 15th) uncertainties do still remain for GBP and thus the bounce back better reflects those risks. My bias remains a fade on EUR/GBP rallies.

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EUR/USD Option expiries: 1.1740-45 (550M), 1.1765 (687M), 1.1795-1.1805 (1.3BLN), 1.1825-30 (750M)

EUR/GBP PivotsSupport: 0.8870, 0.8834, 0.8810. Resistance: 0.8930, 0.8954, 0.8979



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 12% -7% -1%
Weekly 4% 27% 18%

EUR/USD Hourly Chart

EUR/USD, USD/JPY Outlook: Narrative Tug of War Between COVID Vaccine and COVID Cases

Source: Refinitiv

JPY: A slight recovery in the Japanese Yen as US yields ease off a touch (10yrs down 4bps), while a slightly softer risk tone also sees cross-yen edge lower. That said, following the announcement of vaccine breakthrough, risks are tilted to Yen selling. Keep in mind, that market positioning had been on the long JPY side to hedge against election risks, according to CFTC data. Therefore, with only a short period time for USD/JPY below 104.00, JPY will remain vulnerable to a further correction particularly as US yields and the Nikkei 225 remains elevated, the latter trading at a multi-decade high. Alongside this, with notable topside options at the 109.00 strike, I wouldn’t rule out a move for USD/JPY to extend towards those levels.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 5% 1% 3%
Weekly -7% 51% 9%

USD/JPY vs US 10Y Yield vs Nikkei 225 Futures

EUR/USD, USD/JPY Outlook: Narrative Tug of War Between COVID Vaccine and COVID Cases

Source: Refinitiv

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