USD:
The Democrats’ victory in the US midterm elections has
weighed on the US dollar on expected fiscal restraint.
This also comes amid an overstretched market, as long
dollar has been one of the most crowded trades this year, so it remains
vulnerable to quick reversals on changing macroeconomic conditions.
The focus will now shift back to the US-Iran negotiations
and the US economic data. A diplomatic breakthrough could put renewed pressure
on the greenback on lower inflation concerns and rate hike expectations.
An escalation, on the other hand, could initially support
the US dollar on risk-off flows, but eventually weigh on it once growth fears
replace growth concerns.
EUR:
On the EUR side, the ECB held
interest rates unchanged as widely expected but President Lagarde revealed that
they actually debated raising rates at the October meeting but decided to wait
for more information.
She also suggested that if
the current inflation assessment is confirmed by incoming data, the direction
of travel is relatively clear, which is more tightening. The market is already
pricing in a 72% chance of a rate hike in December.
On Friday, there’s the tentative
French budget vote on the revenue part (it’s already been delayed a couple of
times and could happen again). The full budget vote is scheduled for November
17. The vote matters as a test of the government’s ability to deliver fiscal
consolidation.
A smooth passage would
offer some relief and could give the euro a boost, while a rejection or major
concessions that weaken the deficit-reduction plan could put further pressure
on French bonds and the euro.
EURUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that EURUSDis trading at the resistance
zone around the 1.1280 level. We can expect the sellers to step in around the
resistance, with a defined risk above it, to target a break below the 1.1067
level. The buyers, on the other hand, will want to see the price breaking
higher to pile in for a rally into the major downward trendline around the
1.1500 handle.
EURUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have an upward trendline defining the bullish momentum. If we get a pullback,
we can expect the buyers to lean on the trendline, with a defined risk below
it, to keep targeting new highs. The sellers, on the other hand, will look for
a break lower to increase the bearish bets into new lows.
EURUSD TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the sellers will have a better risk to reward setup
around the resistance, while the buyers will look for a breakout or a bounce
around the trendline to target new highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US ADP and
the US ISM Services PMI. Tomorrow, we get the latest US Jobless Claims figures.
On Friday, we conclude the week with the US NFP report and the University of
Michigan Consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.