• The dollar had a strong bullish day on Wednesday after Trump won the election.

• Market participants prepare for a rate cut during the FOMC policy meeting.

• The US reported an addition of 12.000 jobs in October.

The EUR/USD outlook shows a rebound in the euro after reaching new lows due to Wednesday’s Trump trade. Market participants paused the recent move ahead of the FOMC policy meeting, where the Fed will likely lower borrowing costs. 

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The dollar had a strong bullish day on Wednesday after Trump won the election to become the US president again. The Trump trade resumed enthusiastically as markets looked forward to tax cuts and tariffs on imported goods. At the same time, a Trump presidency will likely complicate the Fed’s rate-cutting cycle. After the results, traders lowered the likelihood of a rate cut in December from 77%  to 67%. 

Meanwhile, market participants are preparing for a rate cut during the FOMC policy meeting later today. Although the US central bank will likely cut rates, it will be by a smaller size than traders had expected a few weeks ago. The Fed started its rate-cutting cycle with a super-sized rate cut, which increased expectations of another such move in November. However, economic resilience has changed this outlook. 

Nevertheless, the latest jobs report revealed unexpected weakness in the labor market that might scare policymakers. Economists had expected slower job growth due to recent hurricanes. However, an addition of 12.000 jobs was far below estimates. A dovish tone during the meeting will increase the likelihood of a rate cut in December. On the other hand, if policymakers demonstrate caution, rate-cut bets will fall, further boosting the greenback. 

EUR/USD key events today

• Unemployment Claims
• Federal Funds Rate
• FOMC Statement
• FOMC Press Conference

EUR/USD technical outlook: Bears take charge after evening star pattern 

On the technical side, the EUR/USD price has paused its decline near the 1.0700 key psychological level. It trades far below the 30-SMA, showing bears are in the lead. At the same time, the RSI trades near the oversold region, suggesting strong bearish momentum. 

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Initially, bulls had reversed the trend by breaching the 30-SMA and making higher highs and lows. However, they failed to sustain a move beyond the 1.0900 resistance. Here, bears took charge with the price making a strong evening star pattern that broke below the SMA. Given the solid bearish bias, the downtrend might soon resume with a break below 1.0700.

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Created on November 07, 2024

• The pound fell more than 1%, falling below $1.29, as the stronger dollar gained momentum after early US election results suggested a higher probability of a Donald Trump victory.
• Recently, the GBP/USD losses has extended to the 1.2834 support level; the pair’s two-month low.

Overall, the result has revived “Trump deals,” with expectations that the former US president’s plans to raise tariffs and cut corporate taxes could fuel inflation and keep interest rates high. Meanwhile, the Bank of England is expected to cut interest rates by a quarter of a percentage point on Thursday. However, investors now expect smaller rate cuts next year than expected before last week’s budget announcement. Meanwhile, the Office for Budget Responsibility recently raised its 2025 inflation forecast to an average of 2.6%, up from 1.5% forecast in March. This is closely in line with the Bank of England’s August forecast, which sees inflation at 2.4% in one year, 1.7% in two years and 1.5% in three years.

On another note, UK gilt yields, or government bond yields, a key tool in determining consumer borrowing rates such as mortgages, continue to rise as Donald Trump’s election victory provides fresh impetus. Analyst said, “Financial markets have been gripped by jitters following Donald Trump’s triumphant victory. His policies appear set to add to inflationary pressures and further widen the US deficit, with knock-on effects for the UK economy expected,”

According to reliable trading platforms, the yield (interest rate) offered by two-year UK government bonds rose to 4.51%, while the yield on ten-year bonds rose to 4.57%. added, “Government bonds often move in tandem with Treasury bonds and this special relationship is evident today, pushing up UK borrowing costs sharply.”

UK government bonds were already on edge, with sentiment worsening after concerns about the amount of borrowing the Labour administration was undertaking. “Now Trump’s victory has added to the pressure. Concerns about the inflationary impact of Trump’s promised new round of tariffs are seeping through markets. There are also concerns that his trade policies could hamper UK economic growth. Fears of an emerging stagflation scenario in some economies appear to be haunting markets again.”

By and large, the interest rates that consumers in the UK are exposed to are determined by bond yields as they form a basket of products such as swaps, which in turn influence mortgage rates, credit card rates and lending rates to businesses. US bond yields are rising as investors demand more compensation for holding US bonds, believing their value will fall due to inflation. Meanwhile, Rising yields therefore suggest that markets believe a second Trump term will be more inflationary than the alternative.

Faced with the prospect of higher inflation, economists now expect fewer rate cuts from the US Federal Reserve.

Technical forecasts for the GBP/USD pair today:

According to the technical outlook and performance on the daily chart attached, the general downward trend for the GBP/USD pair is getting stronger. As I mentioned before, stability below the 1.3000 level will strengthen the bears’ control, and the next most important support stations are 1.2880, 1.2800, and 1.2720, respectively. From the last level, the technical indicators will move towards strong oversold levels. On the other hand, and in the same time frame, there will be no initial break of the downward trend without moving above the 1.3150 resistance. Also, the GBP/USD pair will be affected today by the announcement of the Bank of England and the US Federal Reserve, in addition to the reaction to the results of the US presidential elections and Trump’s victory.

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Created on November 07, 2024

The USD/JPY traded at a high early this morning not seen since the end of July, a collision of nervous sentiment and risk events has led to the bullish climb in the currency pair, today there is the Fed.

• Traders who have the emotional fortitude to participate in the Forex markets and still have a taste for adventure have another day of rather volatile speculation awaiting.
• The USD/JPY traded near a high around 154.720 early this morning, the last time this vicinity in the currency pair had been seen was on the 30th of July. The problem facing, or puzzle challenging, retail traders now is that in July a large bearish trend was in the midst of developing.
• Now the USD/JPY is suffering from a bullish trajectory seen since the end of September, and this is where it get interesting regarding potential perspectives. At the time of this writing the USD/JPY is near 154.200 level.

Yes, the USD/JPY touched the 139.700 level on the 16th of September, this as financial institutions bet on a more hawkish Bank of Japan and a more dovish U.S Federal Reserve. The lows seen in mid-September did reverse higher and by the end of September the price in the USD/JPY was around 141.700. Then global risk adverse trading began in earnest and USD centric strength took over, this morning high underscores the nervousness and risk events in Forex and for the USD/JPY. The currency pair has traded in a rather correlated manner along with other major pairs like the EUR/USD and GBP/USD.

Speculative Intrigue and Confusion for the Near-Term

The U.S President election delivered a demonstrative bit of evidence yesterday. The victory of Donald Trump opens the door to the potential of tough negotiations regarding trade agreements with many nations which will cause Forex prices to potentially become volatile. Fast trading in the USD/JPY will remain part of the landscape today.

Japan however for the moment appears to be in a rather calm spot regarding trade with the U.S, in other words for the time being it appears Japan will not grab the attention of Trump as he deals with other Asian nations like China for instance. Perhaps financial institutions will become more tranquil regarding the USD/JPY.

The U.S Federal Reserve and USD/JPY

On top of the Trump consideration and his impact on policy, the U.S Federal Reserve will announce it FOMC Statement later today. The Fed is in a position to cut its interest rate today by at lease 0.25 basis points. U.S economic data last week via GDP and jobs numbers came in below estimates. While most have been worrying about the U.S election, the Fed will grab the spotlight today and their rhetoric will impact the USD/JPY. However, in the short-term may remain quite choppy as financial institutions readjust their outlooks. Yes, the USD/JPY does look overbought, but do not bet blindly on lower move.

While some traders expected a Trump victory, the scope of his victory opens the door for policy changes which could impact the USD and mid-term outlook.
Many of those impacts still need to be thought out. The USD/JPY does look overbought, but nervous sentiment may continue to keep the currency pair within its higher elements for a bit longer.
Those who want to try and sell may want to use resistance levels technically as a place to launch quick hitting attacks.
However the Fed later today will create a sea of volatility, because the Fed has a new U.S President to deal with too.

USD/JPY Short Term Outlook:

Current Resistance: 154.175

Current Support: 153.990

High Target: 154.340

Low Target: 152.800

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• EUR/USD edges higher toward 1.0800 in the European session on Thursday.
• The Fed is expected to lower the policy rate by 25 basis points.
• Investors will pay close attention to Chairman Powell’s comments on the policy outlook after Trump victory.

EUR/USD lost nearly 2% on Wednesday and touched its weakest level since late June below 1.0700. The pair stages a rebound early Thursday and trades above 1.0750 as market attention turns to the Federal Reserve’s (Fed) monetary policy announcements.

The US Dollar (USD) rallied on Wednesday as Donald Trump won the presidential election by a decisive margin. Republicans also took the majority in the Senate and remain on track to capture the House, currently holding 206 seats of 218 needed for majority, against Democrats’ 191. The USD Index, which tracks the USD’s performance against a basket of six major currencies, rose more than 1.5% to register its largest one-day gain of 2024.

Early Thursday, the USD Index retreats and was last seen losing nearly 0.4% on the day, possibly pressured by profit-taking.

The Fed is widely forecast to lower the policy rate by 25 basis points (bps) after the November policy meeting. Fed Chairman Jerome Powell will surely be asked about how Trump’s proposed policies, especially in regard to taxes and tariffs, could impact the policy moving forward. Powell is unlikely to respond to these questions and reiterate the data-dependent approach to policymaking.

In case Powell reaffirms that they are likely to lower the policy rate again at the last policy meeting of the year, the immediate market reaction could cause the USD to weaken further and help EUR/USD stretch higher. If Powell adopts a more cautious tone and voices concerns over the inflation outlook, the USD could hold its ground. According to the CME Group FedWatch Tool, markets are currently pricing in a nearly 30% probability of the Fed holding the policy rate steady in December, suggesting that the USD is likely to react more significantly to a hawkish Fed tone than a dovish one.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 40, suggesting that the near-term technical outlook remains bearish while EUR/USD stays in a correction phase.

On the upside, 1.0800 (static level) aligns as first resistance before 1.0830 and 1.0870, where the 20-day and the 200-day Simple Moving Averages (SMA) are located, respectively. Looking south, first support could be spotted at 1.0700 (static level)  before 1.0680 (static level) and 1.0600 (static level).

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