Above: The Republicans have the Senate

Pound Sterling fell sharply as results from the U.S. election suggested Donald Trump and his Republican Party were on course for victory.

The all-important key swing state of Pennsylvania has been called for Donald Trump, assuring his path to the White House.

CNN has called Pennsylvania for Donald Trump after Fox News made the same call. It effectively means that the Republican candidate has won the 2024 presidential election and puts the White House out of reach for Kamala Harris.

Trump’s win comes alongside a Republican win in the Senate, and they are anticipated to retain the House of Representatives easily.

This means the ‘red sweep’ outcome – the most USD-bullish outcome – has come to pass.

Trump’s pro-tariff and low-tax agenda will now be unfettered by opposition.

Trump’s agenda of tariffs and tax cuts is inflationary, which will lower the tempo of future interest rate cuts at the Federal Reserve, which is bullish for the Dollar.

“The US dollar is trading higher against almost every currency in the world overnight on the news of the big outperformance in the polls from Donald Trump. Not only are markets positioning themselves for a comfortable Trump victory in the electoral college, but the prospect of a Republican controlled Congress, which is key in determining the ability of the incoming president to force policy changes through the US government,” says Matthew Ryan, Head of Market Strategy at Ebury.

His pro-growth agenda (which will involve a significant rise in the USA’s debt) will also boost the ‘American exceptionalism’ trade, in which global investors buy all things American, including its currency.

The Pound to Dollar exchange rate fell to 1.2850 after Trump won the important swing state of Georgia and it was confirmed the Republicans had taken the Senate.

The red sweep outcome was considered by analysts to be the most bullish outcome for the Dollar, with some saying the currency could ascend by approximately 5%.

“I think in terms of outcomes tonight, I would expect GBP to be challenging 1.26 should Trump get announced,” said a trader at JP Morgan.

“The currency market has realised its previously indicated tendency: it firmly believes that the Trump presidency will be USD-positive,” says Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank.

Created on November 05, 2024

• The EUR/USD exchange rate has settled just below 1.09 ahead of the all-important US presidential vote, but a Donald Trump victory would spark major selling pressure on the currency pair once again.
• By Wednesday, the outcome of the vote should be known, and if Trump wins, we expect EUR/USD to approach 1.0760 before the end of the week.
• However, a Harris win, which was seen as increasingly likely over the weekend, would extend the euro’s rally.
• Moreover, the euro starts this important week with a small gain against the US dollar as markets track the lower odds of a Trump win. A number of polls released over the weekend were more favourable for Harris, with one even suggesting she would pull off a surprise win in Iowa.

Overall, the decline in the odds in Trump’s favor would better reflect the uncertainty in the polls, with the margin of error still pointing to a 50/50 tie. The US dollar closely tracks the odds in the odds, having declared the winner 80% of the time in the past 35 years, rising when Trump’s odds are high and falling when his odds are low.

This speaks to the dollar-supportive policy mix proposed by Trump, which includes inflationary tariffs on imports. Accordingly, analysts at TD Securities say that a second Trump presidency would spark a major rally for the US dollar. “This would bring back memories of US exceptionalism, supported by tariffs, tax cuts (the red wave), deregulation and negative impacts on global growth prospects. A Harris presidency would bring some weakness to the US dollar as the Trump risk premium unwinds and a blue wave exacerbates the US dollar’s ​​decline,” the analysts said.

If Harris wins, the euro against the US dollar could extend its recovery to the 1.10 level. Valentin Marinov, an analyst at Credit Agricole, said: “The EUR/USD and GBP/USD pairs could fall to their lowest levels since the first quarter of 2012 or head lower in response to a Trump victory accompanied by a “red wave” in the US Congress. Conversely, their rise could be limited to 1.10 and 1.33 in the event of a Harris victory and a divided US Congress.”

According to stock trading platforms, US stock futures stabilize ahead of the presidential election. According to trading, US stock futures stabilized on Tuesday as investors prepared for the disputed US presidential election. Recent polls indicate a close race between Vice President Kamala Harris and former President Donald Trump, with markets also focusing on which party will control Congress, as a potential victory could lead to major shifts in spending and tax policies.

Investors are also awaiting the Federal Reserve’s policy decision later this week, when it is widely expected to cut interest rates by a more cautious 25 basis points. The Dow Jones Industrial Average fell 0.61% on Monday, the S&P 500 fell 0.28% and the Nasdaq Composite dropped 0.33%. Notable declines came from major technology stocks, including Tesla (-2.5%), Amazon (-1.1%) and Meta Platforms (-1.1%). In after-hours trading, Palantir Technologies surged more than 13% after posting strong quarterly results and an upbeat revenue outlook. Meanwhile, NXP Semiconductor shares fell about 6% after issuing a weak outlook, pointing to broader concerns about the macro economy.

EUR/USD Technical analysis and forecast:

Technically, the EUR/USD may remain in its current bearish range until markets and investors react to the U.S. presidential election results and the Federal Reserve’s policy decisions. Approaching the psychological support level at 1.0800 would reinforce bearish control, signalling a deeper downward move. Furthermore, a Trump victory could push the EUR/USD down to the 1.0660 support level as an initial target.

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Created on November 05, 2024

Potential signal:

I’m a buyer of this pair and have no interest in selling it. There are 2 scenarios that I see offering an entry into this pair. If we pull back to the ¥195 level, I’m a buyer. I would have a stop loss at the ¥192.50 level, and then would aim for a move to the ¥200 level. On the other hand, if we rally and break above the ¥200 level, then I would have a stop loss at the ¥198 level, and simply hang onto the pair for a move to the ¥206 level.

• In my daily analysis of the British pound against the Japanese yen, I noticed that we are in the midst of a major consolidation area.
• This of course isn’t surprising, because we do have an interest rate decision from the Bank of England this week, and that of course will have a major influence on where we go next.
• Nonetheless, I think we got a situation where the interest rate differential will continue to favor the British pound into the foreseeable future, so I still find this a market that I like to the upside.

Technical Analysis

The technical analysis for the GBP/JPY currency pair is somewhat neutral over the last couple of days, but I do see a significant amount of support near the ¥195 level, which is an area that has been noisy for some time. The 50 Day EMA is racing toward that area, and I think that is something that should be noted as it is a large indication of the overall trend. In other words, think that will be a lot of buyers there waiting to pick this market up, assuming that risk appetite doesn’t get eviscerated, nor does the Bank of England lose its mind somehow.

On the upside, I see the ¥200 level as a major barrier, but eventually we should break above it. Quite frankly, you get paid to hang on to this pair, much like my USD/JPY trade in my personal account, you can just simply hold onto it until something changes. I get paid at the end of every day to hold that trade, it would be just as comfortable with this one, although I’m the first to recognize that the Bank of England interest rate decision happening on Thursday isn’t the ideal problem to deal with.

At this point in time, I think you get a situation where it’s likely that any selloff will result in some type of buying opportunity, and that’s exactly how I would approach this market, given the chance. Between now and then, it’s just simply a matter of collecting swaps.

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Created on November 05, 2024

• At the start of trading this week, the GBP/USD exchange rate rose to 1.2998 before settling around 1.2950 at the time of writing this analysis.
• This comes as financial markets react to the increased probability of Kamala Harris winning the presidential election today, Tuesday.
• The odds of Trump winning in the overall betting market are now around 57%, below the high-water mark of 65% seen on October 30.

Furthermore, the US dollar generally tracks these odds closely, rising when Trump’s odds rise and falling when his odds fall. This speaks to the dollar-friendly policy mix proposed by Trump, which would include inflationary tariffs on imports. Several new polls released over the weekend were more favourable to Kamala Harris, with one even suggesting she would score a surprise win in Iowa.

The decline in the odds in Trump’s betting market would better reflect the uncertainty in the polls, with the margin of error still pointing to a 50/50 tie. Analysts said, “Recent polls suggest Harris has gained ground in swing states at the same time that Trump’s odds in the betting markets have continued to decline. Investors at Bull Market and Calci still see the former president as the front-runner. However, Predictit now has Harris winning the contest by a narrow margin,”.

Technical forecasts for the GBP/USD pair today:

Overall, we could have a result by Wednesday, and a Trump win is widely expected to boost the US dollar, while a Harris win would have the opposite effect. Moreover, some analysts believe that a Harris win could send the GBP/USD back to the 1.33 resistance. According to Credit Agricole Bank’s forecast, “EUR/USD and GBP/USD could fall to their lowest levels in Q1 2024 or head lower in response to a Trump win accompanied by a ‘red wave’ in the US Congress. Conversely, they could be limited to 1.10 and 1.33 in the event of a Harris win and a divided US Congress.”

Analysts at TD Securities say that a second Trump presidency could spark a major rally for the US dollar. This would revive memories of US exceptionalism, fuelled by tariffs, tax cuts (on the red wave), deregulation and negative impacts on global growth prospects. Furthermore, a Harris presidency would therefore bring some weakness to the US dollar as the Trump risk premium unravels and the blue wave of the US dollar weakens.

For the pound, the big event locally this week is the Bank of England’s decision on Thursday, when it is expected to cut interest rates by 25 basis points. The cut in sterling has been “in the price” for a long time and is unlikely to have an impact on the market. However, guidance on the possibility of another cut in December will be important.

If the Bank of England leans towards a second consecutive cut, the GBP/EUR rate will come under pressure. However, last week’s budget reduced the likelihood of a December rate cut and the market is now pricing in a quarterly pace of UK rate cuts, which is relatively supportive of expectations. Sterling is therefore expected to react more clearly to any implied future guidance. Moreover, the correlation between foreign exchange yields and sterling has been broken since the budget and higher yields have not helped sterling. However, higher growth and inflation are expected to reduce the Bank of England’s dovishness and support the currency.

The window of opportunity for the Bank to cut UK interest rates has opened up after last week’s budget, where the government announced a large increase in spending that analysts say could give the economy a “strong boost” next year. Fiscal expansion is inflationary in nature, meaning the Bank will have to respond by keeping interest rates higher for longer. Indeed, the Office for Budget Responsibility raised its near-term growth and inflation forecasts after the Budget, and we will be watching the same for the Bank of England. Any upgrades to inflation and growth would therefore be a strong signal that the Bank of England acknowledges that it will have to maintain tighter monetary policy. Obviously, this would support sterling. Also, the biggest risk to sterling would be a scenario in which the Bank cuts interest rates and heads for another rate cut as early as December.

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Created on November 05, 2024

• Amid a neutral stance with a bullish bias, the USD/JPY currency pair may be influenced by signals from the US elections and the FOMC decision this week.
• The US elections are scheduled for November 5, and many say the results could come soon.
• A victory for former President Trump could mean a bullish mood for the stock market, which could also impact the prospects of Fed easing and thus lift the US dollar. Meanwhile, USD/JPY is holding steady around 152.50 at the time of writing.

Later in the week, the Federal Reserve is still widely expected to cut US interest rates by 0.25%, although some say it could hint at a pause in December. It is worth noting that the two non-farm payrolls report surprised markets with their rise, while the latest inflation figures reflected higher-than-expected price pressures, easing pressure on the central bank to stimulate the economy.

On the other hand, the Bank of Japan’s decision appeared less dovish than usual last week, with Governor Ueda hinting that he may tighten monetary policy soon.

According to stock trading platforms, US stock futures settled on Tuesday as investors prepared for the disputed US presidential election. Recent polls indicate a tight race between Vice President Kamala Harris and former President Donald Trump, with markets also focusing on which party will control Congress, as a potential victory could lead to major shifts in spending and tax policies. Investors are also awaiting the Federal Reserve’s policy decision later this week, where it is widely expected to cut interest rates by 25 basis points in a more cautious manner.

According to trading, the Dow Jones fell 0.61% on Monday, the S&P 500 fell 0.28%, and the Nasdaq Composite dropped 0.33%. Notable declines came from major tech stocks, including Tesla (-2.5%), Amazon (-1.1%), and Meta Platforms (-1.1%). In after-hours trading, Palantir Technologies rose more than 13% after strong quarterly results and upbeat earnings forecasts. Meanwhile, NXP Semiconductor shares fell about 6% after issuing a weak forecast, pointing to broader macroeconomic concerns.

USD/JPY Technical Analysis and Expectations Today:

The USD/JPY recently broke through the 147.50-150.00 resistance levels and rallied to a high of 153.86 before retreating. Furthermore, using the Fibonacci tool, levels can be identified where more buyers might join the uptrend. The 100-day simple moving average is above the 200-day simple moving average, confirming that the path of least resistance is upward or that support is more likely to hold rather than break.

The 38.2% Fibonacci level is located at 149.18, followed by the 50% level closer to the area of interest at 147.75, in addition to the dynamic support of the 200-day simple moving average. The dividing line for a bullish reversal could be the 61.8% level at 146.30. The Stochastic oscillator is trending lower to show bearish pressure, but the oscillator is also approaching oversold territory, signalling exhaustion. Technically, a shift to the upside means buyers are ready to take over and potentially push the USD/JPY to a higher high. The Relative Strength Index is also moving lower, so the price may follow suit as sellers are in a better position.

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GBP/USD is trading at $1.29754, up 0.14%, showing strength above the key pivot at $1.29475. This pivot acts as a critical support, and as long as the pair holds above it, the outlook remains cautiously bullish.

Immediate resistance is at $1.29980, with further targets at $1.30194 and $1.30429, signaling potential for upward movement. On the downside, support levels are set at $1.29236, $1.28875, and $1.28539.

The 50-day EMA at $1.29566 reinforces short-term support, while the 200-day EMA at $1.30004 could limit gains. For now, a sustained break below $1.29475 may indicate a shift to a bearish tone.

Euro Slips Amid Weak French Data and Rising Unemployment

The euro (EUR) faced pressure today as French government budget balance widened to -173.8 billion, slightly below the previous -171.9 billion. Additionally, French industrial production declined by -0.9%, worse than the expected -0.5%.

Meanwhile, Spanish unemployment increased by 26.8K, marginally above the forecast of 26.5K, adding concerns over labor market weakness.

Traders are now focusing on the ECOFIN meetings for potential fiscal policy insights that may impact the euro’s trajectory.

EUR/USD Technical Forecast

Created on November 05, 2024

• The British pound experienced considerable noise during Monday’s trading session, which isn’t surprising given the potential disruptions and uncertainties this week.
• It’s hard to envision a scenario without significant volatility, and it seems likely that market turbulence will remain a key factor.

Keep in mind that we have the US election today, which being a third world country, the United States may not even know who its next president is for several days. So that could have markets on edge. Beyond that, we also have the Bank of England interest rate decision Thursday at noon GMT, followed seven hours later by the FOMC interest rate decision, which both are expected to cut 25 basis points.

At this point, I think it’s probably going to come down to the statement in the press conference. So, it’ll be interesting to see how this all plays out, but we are at an inflection point. It is worth noting that we are currently between the 50-day EMA above and the 200-day EMA below. So that typically will cause a bit of volatility anyways.

Looking for Momentum

With that being the case, I think you’ve got a situation where market participants continue to try to find some type of momentum, but right now just are not seeing it. If we could break above the 50-day EMA, then it would obviously be a bullish sign. However, those interest rates in America continue to be stubborn and therefore keep the British pound at bay. A breakdown below the 1.2850 level, and therefore the 200-day EMA, could really have this GBP/USD market falling apart. In that environment, this is a situation where we have a lot of questions asked about the economic outlook for a lot of places, America included.

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Created on November 05, 2024

• The British pound the euro has rallied just a bit during the early hours on Monday as we continue to see this pair try to build some type of bottom.
• This is a market that I think continues to be very noisy but with all of that i think this is a situation where the 0.845 zero level has to be watched very closely.

If we were to break above there, then I think you’ve got a scenario where the market could test the 200-day EMA and then eventually the 0.8550 level. Short-term pullbacks are likely, and that does make quite a bit of sense considering that we have the Bank of England decision later this week on Thursday, and that causes a little bit of volatility.

If the British do, of course, cut interest rates by 25 basis points as expected. I don’t know what it does for this EUR/GBP pair because it’s expected and that is something worth paying attention to. It’ll probably be all about all the internals and the voting and all of that coming out of England for interest rates, but we’ll see. Furthermore, there is a significant amount of resistance above and I think that comes into play as well.

The Resistance Above Worth Watching

After all, the 200 day EMA sits right around the 0.8470 level, and I think it does offer a significant barrier. Breaking above that would open up a bigger move to the 0.8550 level and could change the trend altogether. I suspect over the next couple of days this will be a very choppy and sideways pair, more than anything else but that’s not that out of the ordinary for the Euro against the British pound. After all, this is a market that has been noisy most of the time, and as a result, I think you have a situation where volatility continues to be a major factor.

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Created on November 01, 2024

• In my daily analysis of the Australian dollar against the Japanese yen, the market has seen a bit of a selloff previously, only to turn around and show signs of life.
• All things being equal, this is a market that has seen a lot of support near the ¥99.75 level, which has not only been important multiple times in the past, but also has a certain amount of technical support due to the fact that we have the 50 Day EMA and the 200 Day EMA indicators in that spot.

This is a market that has been stuck between 2 major levels, with the ¥99.75 level being the floor, and the ¥101.75 level above being the ceiling. Keep in mind this market had rallied quite nicely ahead of this, so the fact that we are going sideways should not be a huge surprise. After all, we have the Bank of Japan come out and basically say and do nothing, so now we are waiting for the Non-Farm Payroll announcement on Friday, the reality is that the volatility in the markets will quite often be drastic on the day, despite the fact that you may not be dealing with the US dollar directly.

Risk Appetite

Keep in mind that this is a pair that is very sensitive to risk appetite, as the Australian dollar is considered to be a “risk on currency.” That being said, the market is likely to continue to see a lot of traders looking at whether or not the global economy is going to continue to strengthen, or if we are going to see some type of faltering when it comes to the global risk appetite, and therefore it favors the Japanese yen as it is considered to be a “safety currency.”

I do favor the upside, but we had shot straight up in the air previously, so this sideways action that we have seen over the last couple of weeks makes a lot of sense, and I think is just simply a matter of “working off the froth.”

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Created on November 04, 2024

• The Euro to the US Dollar (EUR/USD) exchange rate recorded its first weekly gain in five weeks after disappointing US jobs figures reinforced bets on a rate cut by the Federal Reserve.
• The US Dollar Index – a measure of the US dollar’s ​​performance against a basket of other major currencies – fell after official figures showed that the United States added just 12,000 jobs in October, well below the consensus forecast of 113,000 and down sharply from 223,000 in September.

According to Forex trading, the Euro to the US Dollar rose to 1.0905 before retreating to 1.0870, bringing the week’s gains to 0.72%.

Meanwhile, financial markets had always expected a slowdown in October due to the hurricanes that hit the southern states. The US dollar might have chosen to ignore this slowdown were it not for some significant cuts in August and September payrolls to 78K and 223K respectively, from 159K and 254K.

Therefore, the cuts in the previous data are where the real story lies, as this data shows a trend of weaker-than-expected results that should bolster expectations for further rate cuts by the Federal Reserve. the experts added, “As it stands, the six-month average in September – before the Boeing attacks and hurricanes – was just 148K, down about 100K from the previous six months. It would not be surprising if this figure was revised downwards as well, given the clear pattern of recent downward revisions,”

A further slowdown in the trend seems likely, as hiring intentions at small US businesses remain subdued, large companies continue to face higher borrowing costs as low-yield corporate bonds mature, and job openings in the health and education sectors have declined. Knut Magnussen of DNB Markets said the large negative revision to total payroll growth in August and September suggests that the recent trend in employment is weaker than the September reading a month ago. “We expect the Fed to ignore the noise and continue with its 25bp cut this week. The 10-year yield fell by around 5bp after the release, and now the 25bp cut has been fully priced in by the markets,” he added.

According to the forex market, the US dollar has been rallying in October in response to a series of better-than-consensus US economic data that has seen a sharp decline in bets on a Fed rate cut. Thus, these figures could put a lid on this trade, which could support the EUR/USD pair.

However, Dr. Thomas Gitzel, chief economist at VP Bank, cautions that we are by no means witnessing a collapse in the US Labor market. “If we exclude one-off effects, employment growth remains robust,” he explains. Despite the weak increase in employment, there are still clear signs of weakness. The Labor market reflects the strong performance of the US economy. Despite the Fed’s rate hikes, there are no signs of an economic slowdown.”

Regarding the Fed’s rate cut this week, he says the move has always been “steady.” He added, “The range of interest rates is well above the current rate of inflation, so there is room for monetary easing regardless of Labor market developments. A healthy economy and a strong Labor market therefore have medium-term rather than short-term implications. Even if rate cuts continue next year, key interest rates are unlikely to return to pre-coronavirus levels at this time.”

Also, the next major event for the US dollar will be the US elections this week, with analysts saying a Donald Trump victory could boost the dollar. If his Republican Party wins Congress, the move could be exacerbated. Meanwhile, economists agree that the US dollar will fall sharply if Kamala Harris wins, which would erase the recent “Trump trade” premium that has built up in currency markets.

EUR/USD Technical analysis and forecast:

We expect the EUR/USD pair to remain in its current range with a bearish bias until the reaction to the announcement of the crucial US data. Also, events this week led by the US presidential election results and then the US Federal Reserve’s announcement of updating its monetary policy decisions. Furthermore, the bias for the EUR/USD pair will remain bearish as long as it is close to the support level of 1.0800. Ultimately, there will be no initial break of the downtrend without moving above the psychological resistance of 1.10000.

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