Created on November 06, 2024

• The Aussie dollar rallied in the early hours on Tuesday as we continue to see consolidation between the 99.50 yen level below and the 101.50 yen level above.
• In general, this is a market that I think continues to see a lot of questions asked about risk appetite, but it’s worth noting that overnight, the Reserve Bank of Australia chose to keep its interest rates level.
• So with that, I think there was a little bit of a relief rally in the Australian dollar.

Now, the question is, will risk appetite benefit the Aussie or will people run to the Japanese yen? A move above the 101.50 yen level, I believe, unless it’s a huge move to the upside, perhaps all the way back to the 109 yen level for some time. This is a market that will continue to be noisy, but at this point in time – I suppose that I favor the upside in general.

A Break Down Coming?

If we were to turn around and break down below the 99.50 yen level, then it’s possible that we could go down to the 98.50 yen level, maybe even lower. In general, the interest rate differential between the two countries continues to favor Australia and probably will for the foreseeable future. So, I do think you have a situation where SWAP continues to favor the Aussie. So therefore, carry traders will continue to favor the upside. I have no interest in shorting this pair, at least not at the moment, but we’ll have to wait and see. With the US elections and the inability of Americans to have an election in a 24 hour period, it’s possible that we see a lot of volatility over the next couple of days. Because of this, you need to be cautious about position sizing, as this could be very disruptive over the next few sessions. On its face, this is a market that is looking to determine where it wants to go overall.

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Created on November 06, 2024

Technical forecasts for the GBP/USD pair today:

The final poll by Five Thirty-Eight shows Harris at 48% and Trump at 46.8%, indicating a statistical tie. Betting markets have seen Trump’s lead over Harris shrink over the past ten days, with PredictIt showing a near-even race on election day. Trump was previously the Favorite in October, strengthening the dollar. However, as the race tightened, the dollar has traded below recent highs.

Markets continue to unwind “Trump trades” on the back of the latest Des Moines Register US election poll, which gives Harris a lead over Trump in Iowa. “Trump trade” are in the dollar’s ​​favour given the higher inflationary implications associated with the former president’s policies of tariffs and tax cuts. In general, uncertainty about the outcome is likely to prevent financial markets from making a big move, and we may see some movement tonight as the first results start to come in. If the initial results show that Trump does well, we expect the GBP/USD exchange rate to fall below 1.30, as the move accelerates towards any confirmation of his victory.

Commenting on the event and the outlook, Robert Thompson, chief economist at IBOSS, said: “If Trump wins, the market reaction will be more ambiguous. A Trump victory is likely to strengthen the US dollar and push up government bond yields because his plans to raise tariffs sharply would boost inflation and reduce the Fed’s willingness to cut interest rates.”

In terms of the pound, we expect pairs like GBP/AUD and GBP/NZD to also rise on such an outcome as investors start to worry about US-China relations, which has implications for the Australian currencies. According to analysts at Société Générale: “The Australian dollar is already trading at a discount due to concerns about the impact of a Trump victory on China.” The impact of a Trump victory on GBP/EUR will be more contained, and the pair could rise, especially if we see a rally in the stock market.

The question for the euro is whether Trump pushes for trade tariffs on the eurozone, which could impact EUR/USD more than GBP/USD, meaning the GBP/EUR exchange rate could rise.

Citibank warns that if early results suggest Harris performs better than expected, there could be a panic unwinding of long US dollar positions (tariff positions such as the US dollar versus the euro, the Chinese yuan, the Mexican peso and the Korean won). Also, equity markets will do well here as uncertainty fades and “business as usual” returns to calm fears, boosting currencies such as the Australian dollar, the New Zealand dollar and the euro. Furthermore, we could see GBP/EUR come under pressure as the euro shows relief that the eurozone will not face a potential tariff war with the US.

Furthermore, financial markets would react negatively, with the U.S. dollar gaining and risk-sensitive currencies under pressure. GBP/EUR could also be negatively impacted, potentially falling below 1.19.

In the same vein, Citibank’s pre-election analysis says that vote counting will be faster than in 2020 but counting in a few larger counties could continue later in the week. Pennsylvania polls close at 20:00 EST, with Nevada being the last to close among the swing states. Analysts expect results for Georgia, Michigan, North Carolina and Wisconsin to be released overnight, but may need to wait until the following day for Arizona and Pennsylvania, given historical timing and election processing rules.

Citibank adds that some early market action could focus on some key county vote results that could provide a glimpse into broader trends. Expect volatility to increase when these deals start to appear.

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Created on November 06, 2024

According to stock trading platforms, Wall Street indices are booming on Election Day. US stocks rose on Election Day as investors awaited the outcome of the tight race between Kamala Harris and Donald Trump. The S&P 500 rose 1%, the Nasdaq 100 gained 1.3% and the Dow Jones rose about 400 points. All sectors were in the green, with consumer discretionary, industrials and technology leading the gains. Chipmakers outperformed, with Nvidia up 2.5%, Intel up 3.4% and Broadcom up 2.6%, driven by strong demand for AI data centres reflected in strong third-quarter earnings from Astera Labs on Monday. Major tech stocks also rose, including Meta (up 1.6%), Amazon (up 1.7%) and Tesla (up 4.8%). However, Boeing shares fell 2% as workers accepted a new Labor deal, ending a strike. Looking beyond the election, markets are focused on the Federal Reserve’s policy decision on Thursday, with traders widely expecting a 25-basis point rate cut. Furthermore, investors remain cautious about potential market volatility if the election results face delays or disputes.

USD/JPY Technical Analysis and Expectations Today:

USD/JPY has been trending higher in the past few days, with higher lows connected by a bullish trend line that has held since late September. Technically, the price could be on the verge of testing this support area again soon. The Fibonacci retracement tool shows additional levels where buyers may be waiting. The 38.2% Fibonacci retracement level at 149.27 is near the trend line, then the 50% Fibonacci retracement level at 147.81 is near the dynamic support of the 200 SMA. The ascending retracement line could be the 61.8% Fibonacci retracement level at 146.35, as a break below this level could signal the start of a reversal.

Meanwhile, the 100 SMA is above the 200 SMA to indicate that the stronger resistance path is upwards or that support is likely to hold rather than break. Clearly, the gap between the indicators appears to be widening to reflect strong upward pressures. If any of these indicators hold as support, USD/JPY could resume its climb to the high of 154.00 or higher. Stochastic is already rising from oversold territory to signal a revival of bullish pressures, and the oscillator has plenty of room to run before hitting overbought territory to signal exhaustion. The RSI has some room to slide before hitting oversold territory to signal exhaustion, so the correction may continue until that happens.

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November 6, 2024 – Written by Frank Davies

STORY LINK Pound to Euro Rate Jumps on President Trump Win, USD Rallies, EUR Pressured

US Ddollar gains to some extent.

The Pound to Dollar (GBP/USD) exchange rate dipped to just below 1.2850 before regaining the 1.2900 level.

The Euro has been hit harder than the Pound due to fears over a more aggressive trade policy and damage to the Euro-Zone economy.

In this context, the Pound to Euro (GBP/EUR) exchange rate has strengthened to 1.2000.

According to ING; “Given the UK economy’s smaller exposure to trade than the eurozone and some recently announced fiscal stimulus in the UK, EUR/GBP looks likely to press support at 0.8300 and looks biased to 0.8200 now.”

This would represent gains to 1.22 for GBP/EUR.

Former President Trump has secured re-election with victory in at least six of the key battleground states and is also on course to win the popular vote.

The Republicans will also gain control of the Senate while the House outcome is still uncertain.

Control of the House will be very important for the US agenda.

In this context, ING considers that the House result will be very important for all asset classes.

ING commented; “with the Senate already been called for the Republicans, the base case for financial markets is currently a red clean sweep. Still, the House race remains a very close one, and the Congress split is likely to have deep implications for risk sentiment and the dollar.”

According to MUFG; “Of course there are different kinds of clean sweeps and only a marginal majority could be seen as a potential curtailment of some of Trump’s fiscal policies with the potential for moderate Republicans to block big spending policies.”

MUFG commented; “We indicated in our FX Outlook in October and November that a Trump victory would lead to a potential 7-8% stronger US dollar relative to the forecasts if Harris won.”

It expects EUR/USD will trade below 1.05, undermining GBP/USD support.

Markets will be looking at the European context, especially given expectations of a tougher trade policy from a second Trump administration.

Commerzbank also expects the single currency to come under pressure; “The euro area is likely to suffer disproportionately from a restrictive US trade policy. Not only because of its direct exports to the US. Should the US not remain the ultimate sink of global trade flows (or only in terms of trade that are more favorable for the US than before), global trade as a whole may suffer. This will affect the export nations. And quite a few of them are in the euro area. Germany, for example.”

Danske Bank expects the economy will be a near-term focus; “Regardless of the final election outcome, economic fundamentals will likely resume as the primary market driver until there is greater clarity on the winner’s policies, particularly regarding trade and fiscal policy.”

Foreign Exchange Rate Winners and Losers:

Pound to Euro exchange rate (GBP/EUR) is 1.1995 (+0.56%)
Pound to Dollar exchange rate (GBP/USD) is 1.28936 (-1.14%)
Euro to Dollar exchange rate (EUR/USD) is 1.07491 (-1.69%)

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• Voting reveals that Trump will be the next US president.

• Data on Friday revealed a poor performance in the US labor market.

• The Bank of England will likely cut rates by 25-bps on Thursday.

The GBP/USD forecast turned to the downside after news outlets reported that Republican candidate Donald Trump won the election. Meanwhile, market participants prepared for a rate cut at the Bank of England policy meeting.

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Voting in the US on Wednesday revealed that Trump was in the lead and would likely become the next president. After weeks of speculation, market participants are more convinced that Trump’s policies will increase inflation. Therefore, the Fed might have a difficult time finishing its rate-cutting cycle. 

After the election, the market focus will return to the state of the US economy and the FOMC policy meeting. Data on Friday revealed a poor performance in the US labor market. The US economy added just 12,000 new jobs in October, well below estimates of 106,000 additional jobs. However, the impact on the dollar was minimal because the unemployment rate remained steady. At the same time, experts noted that the slow job growth was due to disruptions caused by hurricanes.

Nevertheless, the report might shape the tone during the FOMC policy meeting. Before the data, policymakers had assumed a more hawkish tone, with some expecting the central bank to pause in December. If this tone remains, the dollar will rise. On the other hand, if the Fed signals another rate cut this year, the greenback will collapse.

Meanwhile, the Bank of England will likely cut rates by 25-bps on Thursday. This outlook follows recent figures showing inflation at 1.7%, below the central bank’s targets. However, most economists believe this might be the last rate cut for the year.

GBP/USD key events today

Market participants will keep digesting the US election results as there are no other high-impact reports.

GBP/USD technical forecast: Bulls give up control above 1.3000

On the technical side, the GBP/USD price has collapsed after failing to sustain a move above the 1.3000 key psychological level. Bulls had attempted to take charge. However, sentiment suddenly shifted when the price made a bearish engulfing pattern. 

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A break below the 22-SMA has allowed bears to retest the 1.2850 support level. If bears maintain enthusiasm and the RSI stays below 50, the price will make a new low below 1.2850, continuing the previous downtrend. 

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GBP/USD is trading lower at $1.28738, down 1.27% amid dollar strength. The pair is below the pivot point at $1.28917, signaling a bearish bias in the short term.

Immediate support lies at $1.28464, and a break below this could push GBP/USD toward $1.28135 and potentially $1.27792 if the selling pressure intensifies.

On the upside, resistance is at $1.29197, followed by $1.29518. However, with the 50-day EMA at $1.29620 and the 200-day EMA at $1.29975, strong overhead resistance suggests limited room for recovery unless these levels are breached.

For now, staying below $1.28917 keeps the bearish outlook intact, as the stronger dollar weighs on the pound.

Euro Weakens Amid Mixed Data, Lagarde’s Speech Looms

The euro faced mixed influences on Tuesday with French industrial production falling by -0.9%, missing expectations of -0.5%, while the government budget deficit widened to -173.8 billion euros. Spanish unemployment rose by 26.8K, slightly higher than forecast.

Looking ahead, German factory orders are expected to show a recovery with 4.2% growth, and ECB President Christine Lagarde is set to speak, potentially impacting the euro’s short-term outlook.

EUR/USD Technical Forecast