A truly remarkable day in so many ways yesterday. The 50/1 outsider became President of the United States. The forex and equity markets reacted harshly at first and then within hours, we were trading higher. FX traders were scrambling to position themselves and made for a fascinating day.
Dean's Daily FX Update – 10 November 2016
In the Zone
- EURUSD
- USDJPY
Noteworthy News
- Just in case anyone has been in hibernation – Donald Trump is to become the 45th President of the United States of America.
Recap
Traditionally the day after the Presidency changes hands we have a selloff in the Equity Market, one just has to look at 2008 when Obama became President, and the US Equity Market sold off 5%. The market generally takes some time to dust itself off and then rallies, yesterday was characterized by the market getting fully on board and started the rally within 2 hours – equity markets actually closed the day up by over 1%.
We can say that Donald Trump has already brought with him a lot of market volatility, but I think that we need to unpack it carefully. The Stock Market clearly is on board with the policies that Trump will bring to the market – decreasing regulation, increased fiscal spending, and lower corporate taxes will all increase growth. The Bond market was also on the front foot as Donald Trump pledged to improve the infrastructure of the US.
Cable aside, the USD was able to reverse all the early pessimism. It was palpable how quickly the “Trump fear” dissipated and the dollar was able to rally – obviously the higher rates did not hurt its cause.
The safe haven currencies were the most affected as the risk environment changed. The EURUSD gave back all its recent gains and traded lower by almost 300 pips from the day’s highs. The market will be looking for support at 1.0900, I would be more comfortable looking for support closer to the 1.0850 – 1.0820 level. These were the October lows, whilst the recovery yesterday was steep, it was also steady and that suggests that this move may not be done quite yet.
The USDJPY was similar in price action to the EUR, it is at its topside resistance level of 105.25, and I still think we may have another look higher today. I would like to see reaction closer to 105.60, if we are able to breach that level it could extend yesterday’s move. Both the EUR and JPY are in the zone, but as covered in the video I am hesitant to participate in either just yet.
After the initial broad buying of the greenback, commodity currencies were also able to benefit by the risk on sentiment in the market later in the day. The AUDUSD and the USDZAR were able to recover quicker than most pairs, both are in the middle of their ranges but there may be some room for further recovery first thing this morning. The NZDUSD was affected by a rate cut this morning, Governor Wheeler did put a further cut at around 20% – I am looking for the market to recover to 0.7323 and will then reassess from there.
Daily FX Ranges
EURUSD
Resistance 1.1038 – 1.1050
Support 1.0925 – 1.0900
GBPUSD
Resistance 1.2450 – 1.2460
Support 1.2380 – 1.2360
AUDUSD
Resistance 0.7705 – 0.7720
Support 0.7650 – 0.7630
NZDUSD
Resistance 0.7340 – 0.7355
Support 0.7250 – 0.7230
USDCAD
Resistance 1.3430 – 1.3450
Support 1.3360 – 1.3350
USDJPY
Resistance 105.40 – 105.70
Support 104.00 – 103.80
USDCHF
Resistance 0.9815 – 0.9840
Support 0.9745 – 0.9725
USDZAR
Resistance 13.5340 – 13.6000
Support 13.3500 – 13.3200
Important Economic Data out today
- 15:30 USD Unemployment Claims
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