USD taking a turn for the worse again - is this just a knee-jerk reaction to the elections?

Published date: 07/11/2018

We are seeing USD weakness this morning, with the view that US growth may be hampered by the lack of freedom president Trump may have in implementing further fiscal stimulus - i.e, tax cuts.  Across the board, we are seeing weakness in the greenback, though we need to see some notable levels taken out in order to view this as a significant break lower.  

Technically, as long as the USD index remains above 94.00 - much lower down, then the USD uptrend remains in place.  In the meantime, there is a lot of play at current levels given the impact on sentiment of a split Congress.  EUR/USD is trying to push above 1.1500 at present, though this is a very strong level given it has been a failed base a number of times now, and so turns into resistance.  If we do break higher, then 1.1600 will be just as tough if not tougher, with EU wide politics weighing on the single currency as the standoff between the EU and Italy continues.  

GBP is naturally weighed by the ongoing Brexit talks, and even though there is a wave of optimism currently sweeping through the market, traders will wait to get details of any deal, if or when it comes, before deciding whether it will be good enough to pass through a divided UK parliament.  As we noted earlier, we see resistance either side of 1.3200, and this looks to have drawn in sellers ahead this particular level.  

Buyers are still coming in below 113.00 in USD/JPY, and despite the lack of upside progress, are not put off by a congested upside.  The risks here are perhaps the greater given how Wall St may react later on, so we will be watching the cash open to see how US investors respond to events last night.  

AUD/USD is coming up against resistance at 0.7300, while NZD/USD is also stalling despite the strong jobs report in early Asia, and we also have the RBNZ meeting in the overnight session ahead, where the board may downplay the data in terms of monetary policy implications.  

USD/CAD has broken lower, though is likely to be restrained by Oil price which remains heavy for the time being.


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