A massive day for the equity and FX markets. Forex traders had plenty to sink their teeth into as the dollar came under pressure. The FOMC tonight and additional volatility expected before the US Elections. Should be plenty to keep traders interested.
Dean's Daily FX Update – 02 November 2016
In the Zone
- EURUSD
- NZDUSD
- USDCAD
- USDJPY
- USDCHF
Noteworthy News
- There is increasing pressure being heaped onto President Zuma, he has always been able to defy the odds in the past but as the pressure grows it will start to cast a shadow over whether he will be able to see out his term. I will be watching these development with a keen eye.
Recap
We continue to experience some risk coming out of the US which in turn is leading to broad dollar selling. The Clinton email saga is starting to grip the world and the promise of increasingly damaging “leaks” on a daily basis is starting to affect the polls, what looked like a one horse race last week is slowly becoming a two horse race again as Donald Trump builds a little momentum.
Throw in an FOMC Meeting today and the Non-Farm Payroll data release on Friday for good measure, there is a lot of event risk in the market this week, and a lot of flags telling us to heed caution for the rest of the week. To illustrate the importance that the US Election will have over the next week one just needs to observe recent economic data, the data has been solid yet equity markets have sold off over the scandalous political uncertainty. Consider yourself warned – make sure you are strapped in!
The more amplified the risk – the larger the flight to safety. This is more or less what we saw yesterday with the “relative safety” of the Yen and the “Swissy” taking centre stage. The USDCHF plummeted by 1.37% and if you needed confirmation, the Swiss Franc strengthened as much against all its peers. The USDCHF broke through both the 200 day MA at 0.9765, early morning suggests that the bears may be firmly in control as we have seen price eek lower.
Just when the USDJPY looked as though it would attempt to break through upside resistance at 105.50 so events stateside changed the landscape. The USDJPY traded below support at 104.50 and I was gobsmacked at how little “fight” there was in the Yen as it traded as low as 103.90. There was an equity market led rally but I think that 104.20 will have changed polarity and has for now become resistance and would expect to see a little bit more momentum this morning.
Likewise, the EURUSD also had a deep rally as price broke major resistance, the sellers have become buyers. What was resistance has now in my opinion become support and I would look for buyers to start building bids around 1.1025 which could build a solid base for any pull backs.
The Commodity currencies were a little bit subdued, the improving gold price did aid the AUDUSD and USDZAR but as is the case in a “risk off” environment, the flight to the safe haven currencies usually affects the commodity currencies and both the AUD and ZAR gave back its gains. The USDCAD did attempt a rally, but with oil not aiding its recovery found some support at 1.3350. With the RBC Governor speech out the way, I would expect the USDCAD to possibly attempt a little bit of catch up today.
As per usual when we have increased volatility, I become prone to take my profits off the table rather quickly and I will continue with this strategy until after the US Elections next week.
Daily FX Ranges
EURUSD
Resistance 1.1085 – 1.1100
Support 1.1022 – 1.1000
GBPUSD
Resistance 1.2255 – 1.2280
Support 1.2210 – 1.2195
AUDUSD
Resistance 0.7660 – 0.7700
Support 0.7620 – 0.7600
NZDUSD
Resistance 0.7240 – 0.7267
Support 0.7164 – 0.7150
USDCAD
Resistance 1.3410 – 1.3435
Support 1.3380 – 1.3358
USDJPY
Resistance 104.00 – 104.30
Support 103.53 – 103.00
USDCHF
Resistance 0.9788 – 0.9800
Support 0.9700 – 0.9660
USDZAR
Resistance 13.6590 – 13.7050
Support 13.4000 – 13.3000
Important Economic Data out today
- 11:30 GBP Construction PMI
- 14:15 USD ADP Non-Farm Employment Change
- 16:30 USD Crude Oil Inventories
- 20:00 USD Fed Funds Rate
- 20:00 USD FOMC Statement
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