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Nov 05 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Holds Gains Amid Post-Election Vigil, Steady Fed

By Randolph Donney  —  Nov 05 - 03:05 PM

The dollar trimmed losses after falling to two-week lows earlier on Thursday, as investors awaited U.S. election clarity while coming to grips with the possibility of a divided government.

The conclusion of the Fed's two-day meeting produced little market reaction, leaving policy and its statement largely unchanged nL1N2HQ23I.

Since Tuesday, investors have been revising pre-election expectations of a Democratic sweep of the U.S. presidency and Congress to reflect preliminary results suggesting challenger Joe Biden might defeat Republican incumbent Donald Trump while the GOP maintains control of the Senate.

That has led to diminished expectations of pandemic relief funding but also less risk of higher corporate and capital gains taxes, a result that has comforted the stock market.

EUR/USD rose to a post-election peak of 1.1860 on EBS before encountering sellers who prevented further progress toward October's 1.18805 high nL1N2HR1U3.

EUR/USD is positively correlated to the S&P 500, which ran into resistance ahead of its October high.

Thursday's dollar index low exactly matched October's trough and its ability to hold above it produced a palpable rebound nL1N2HR1MV.

USD/JPY finally cracked key support at 104, which it had held repeatedly the past few months.
It subsequently probed below support by the final 76.4% Fibo of the massive 101.18-111.715 pandemic panic range from March at 103.66.

A close below there would give the somewhat oversold downtrend a bit more backing for retesting the pandemic lows.
But it would be odd for it to do so without some sign of stress from stocks nL1N2HR212.

Global FX risk gauge AUD/JPY rallied to 75.41, threatening the 100-day moving average hurdle at 75.46.

Sterling nearly reached Wednesday's 1.3140 high after the BoE's higher-than-expected QE increase somehow assuaged worries about its recent research into negative rates nL1N2HR1HI.

Risk-sensitive cable may struggle to clear October's 1.3177 peak if S&Ps run into trouble near recent record highs, while the UK faces a month-long pandemic lockdown and unresolved EU trade-deal negotiations nS8N2GY09D.
The UK Treasury announced a 200bln pound boost to its jobs rescue program nL1N2HR1CL.

A plunge in USD/CNY overnight set the early bullish tone for high-beta and emerging markets currencies versus the dollar.
USD/CNH made a 27-month low.

AUD/USD cleared October's highs and looks set to close above the daily cloud for the first time since Sept.
22, with September's 0.7413 high the prize for bulls nL1N2HR1NL.

The monthly U.S. employment report takes the data spotlight on Friday after a huge ADP miss, though election news will take top billing.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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