Daily Market Analysis from ForexMart

The Bank of Japan and the Federal Reserve did not release any important economic statements today, and investors from Japan are not expected to make any significant movements until after the US presidential elections. The USD/JPY pair is also expected to further decrease in value due to the most recent movement in oil prices. The USD/JPY pair further widened its gap during Monday’s session, increasing from 103.13 to 103.74 points due to gap traders triggering an increase in the gap value.


Meanwhile, the pair’s pricing was able to increase by up to 104.50 after the upward momentum for the pair decreased and is expected to be sustained until the end of the New York session. The 4-hour chart for the pair showed the USD going over its current moving averages, with the 50, 100, and 200 EMAs exhibiting an upward direction. Resistance levels for the support is expected to be at 104.50, while support levels are expected to be at 104.00 points.


MACD levels for the pair exhibited a drop in seller strength due to its increase. RSI indicators are still in the overvalued range but could probably go lower as the trading session progresses. The negative outlook for the USD/JPY could possibly fade if the currency pair goes over 104.00 points, and buyers could be able to increase their profits if it reaches 105.00. Conversely, bears might be able to induce the pricing to go beneath 104.00 points.

The market is keen and waiting for the U.S. presidential election on November 8 afternoon time in USA. The polls shown a tight competition between the candidates. Traders learned from Brexit that it is much safer to be on standby and wait for the results that is why there is less volatility yesterday until this day. This day determines the short term trend for various instruments which is being anticipated by market players.


Yesterday was bearish for the pair as the U.S. Dollars strengthened with traders aspiring Clinton to win. It posited at 1.1050 and 1.1031 physiological levels. Volatility is expected for the day with the bearish trend to continue as the election closes by. The financial market is positioning with Clinton winning as this is what they want which is expected to further strengthen the U.S. Dollars once the results are out. However if the Republican candidate Donald Trump wins the election, this is not what is expected that may cause a short-term turmoil in the market.


There are no other major economic news to be released neither from the Euro region nor on the U.S.A today. Everyone is looking forward for the election which is the focus for the past weeks bringing volatility today and tomorrow. It is presumed for other data to come out after the election results are out. It is advisable for traders to be keen in their positions with tight stop losses.

The USD increased tremendously against the JPY during Thursday’s trading session after investors posted a somewhat hopeful sentiment towards President-elect Trump’s term, as well as his ability to add stimulus to the US economy as well as increase the nation’s interest rates. The USD bounced back to 106.94, its highest level reached since July. The USD/JPY pair closed down the previous trading session at 106.793 points after increasing by +1.08% or 1.139 and is expected to make further gains at 3.5%.


Since today is a US bank holiday, the USD is expected to get high levels of support from the US Treasury market, which could possibly lead to limited upside activity or profit taking, especially since US Treasury yields reached its highest levels this week, its highest after 10 months. The USD/JPY could either increase further if the US reflation trade gains momentum and long-term US Treasury yields go higher, or the currency pair could be augmented by a steady flow of interest rate hikes from the Federal Reserve. However, there is also a possibility that the USD could lose its footing against the JPY, especially since one of the major highlights of the Trump presidency is protectionism, which could adversely affect the US foreign trade.


The recent activity of the USD as well as the US equity markets suggest that investors are expecting that Trump would be able to become successful with regards to expanding the US economy by way of tax cuts and fiscal spending. These could induce inflation levels and add up to the US debt, prompting the Fed to increase interest rates next year in a more frequent succession than previously expected.

The GBP/USD also experienced the effect of the increased market volatility during the US elections, however its reaction was largely different compared to that of the other currency pairs. The GBP/USD pair was steadily increasing amid initial market expectations of a Clinton victory but as it became clear that Trump was winning the presidency, the currency pair suddenly increased in value as opposed to other currency pairs, which either went up and down or experienced a large decline.


The GBP/USD reached the 1.2550 range but slowly decreased as the market reconciled with a Trump victory and as the USD slowly regained some of its lost value. However, as the other currency pairs steadily dropped in value as the USD rose, the sterling pound instead rose higher and came to rest at a much higher trading range than the USD. This led to speculations that since the US was able to survive the sudden onslaught brought about by a Trump victory, the UK would also be able to hold off on its own as the Brexit progresses. The increase in the GBP was largely due to a minimizing of the initial market overreaction to Brexit, and causing the pair to go up to 1.2670 and ended the previous week with just a little below 1.2600.


The market is expecting the release of the CPI data and inflation reports from the UK this week, which could give hints regarding the overall status of the UK economy and help in evaluating the further effects of Brexit on the nation’s economy.

The USD/CAD pair was able to reach its short-term target of 1.3500 since the pair was one of the least volatile currency pairs after the market’s reaction to the US presidential elections last week. The USD in particular exhibited wild up-and-down motions while the US elections was in process as investors did not know how to react to the sudden victory of Donald Trump. Trump is not yet known how to act as a political figure, however he is expected to implement protectionist policies and it is expected that Canada would also be affected by Trump’s “neighbor” policy, causing the CAD’s reaction to the elections to become somewhat muted as compared to other currencies.


Oil prices have also experienced added activity last week, as this commodity has a significant effect on the Canadian economy. For this week, major economic releases from the US include the retail sales data as well as a testimonial from Fed’s Janet Yellen who is expected to outline the Federal Reserve’s future policies. The market is still expecting a rate hike in December, and the Fed is also expected to increase the frequency of its rate hikes for 2017, and this speculation has been one of the reasons behind the large upticks occurring in the USD/CAD pair. However, these policies might be subject to changes as the weeks progress and as Trump assumes office next year.

The USD experienced a sharp increase against the JPY following a series of investor reactions regarding Donald Trump’s sudden victory in the US elections. The USD/JPY pair closed down last week’s session at 106.615 points after increasing by +3.45% or 3.552 points.


A large number of investors had a flight to safety on November 8 due to uncertainties brought about by the elections, a move highly similar to the Brexit referendum last June. This resulted to increases in the prices of gold and CHF, but as the market came to terms with a Trump victory this has resulted to a steady increase in the US dollar. The market is now expecting added inflation due to Trump’s policies, which include added fiscal spending and production of trade. This has caused the US Treasury yields to increase, therefore putting upward pressure on the USD and making the USD a more sensible investment as compared to Japan’s government bonds. Analysts are now saying that this could compel the Federal Reserve to increase the frequency of its rate hikes.


The USD/JPY pair is expected to continue increasing if the US Treasury yields continue to strengthen as well. Major economic releases from Japan include the nation’s Preliminary GDP, which is expected to clock in at 0.2%, which is the same as the previous GDP report. For the US, expected economic releases are the Retail Sales data, Philadelphia Fed reports, Building Permits data and the Producer Price Index data. Federal Reserve Chairwoman Janet Yellen is also expected to make a statement on Thursday.

The EUR/GBP pair lost its sellers below the 0.86 region for the third consecutive session, maintaining the currency pair’s stance over the key levels in the light of a highly active economic calendar. The market is expecting the release of Germany’s GDP report for the third quarter of 2016. The CPI data for the UK is also expected to exhibit an increased cost of living for the nation at 1.1% for October. The GDP report for the European Union is also expected to get significant attention from market players as it gets released later in the session.


The increased activity in the economic calendar could lead to an increase in stock market activity, which will then have a significant impact on the demand for EUR. The EUR/GBP is currently trading at the 0.8610 range, and incessant bounces from the 0.86 handle could possibly cause the pair to break through the handle and could lead the pair to trade at 0.8652 points and 0.85. On the positive territory, if the pair manages to go above its 100-DMA of 0.8628 then this could cause the pair to go over 0.8664 and possibly even reach its zero figure of 0.8700.

The USD has been recently exhibiting a steady increase, causing the EUR/USD pair to open this week’s session with a weaker value and went even lower as the previous session progressed. The currency pair closed last week’s session at its support levels of 1.0850 and the market was expecting further support levels at 1.0800. However, the EUR/USD started out the previous trading session at below 1.0800 in the light of a broadly increasing USD value.


The EUR/USD further decreased in value, going through 1.0750 at the London session and tested support levels at 1.0700 at the start of the New York trading session. The movements of the EUR/USD were somewhat muted during the course of the trading session, mainly due to the significant strength of the USD plus Draghi opting to stay mum with regards to the ECB’s future plans on its monetary policies. The currency pair spent the rest of the New York session consolidating after the market chose to keep a positive outlook for the Trump presidency, and the USD is expected to have a continuously positive reaction in the market.


The market is now expecting the release of Germany’s preliminary GDP during the European session, as well as the retail sales data from the US to be released during the New York session. These are expected to confirm market speculations with regards to the Fed rate hike in December.

The JPY was subject to selling pressure following a speech from the Bank of Japan’s Haruhiko Kuroda. The Japanese yen was unable to receive substantial support from domestic demand in spite of the positive output for the Japanese GDP for the third quarter. Meanwhile, the USD was subject to increased buying pressure, causing the USD/JPY pair to increase in value. The currency pair’s value continued to trade along the upper range, with the pair testing the 108.00 range, where it remained until the end of the London trading session. The New York session saw the USD/JPY break through its previous level and buyers were able to extend profits beyond the 108.00 region.


The USD/JPY’s 4-hour chart shows the pair going well beyond its current moving averages, while the pair’s 50, 100, and 200 EMAs showed a significant increase in value. Resistance levels for the USD/JPY is currently at 108.50, while support levels are expected to be at 108.00. The pair’s technical indicators are all situated at the positive region. The USD will have to go beyond 108.00 in order to maintain the pair’s bullish stance and to keep the pair going up to 108.50. Sellers are also expected to make a comeback in the market, with the 106.50 as their primary aim for the USD/JPY.

The AUD/USD pair exhibited increased volatility during Tuesday’s session but ended the session on a higher range at 0.7559 points after increasing by +0.05% or 0.0004 points. Meanwhile, the NZD/USD closed down the previous trading session at 0.7099 after decreasing by -0.24% or 0.0017 points.


The Australian dollar received substantial support after the Reserve Bank of Australia released the minutes of its recently concluded policy meeting. The minutes of the RBA showed a balanced inflation risk, indicating a more stable monetary policy which is expected to go forward. The RBA has also showed a positive stance with regards to global growth. However, the market has to consider that the RBA meeting took place prior to the election of Donald Trump.


The Australian dollar broke sharply as the session closed due to the release of the US retail sales data which came out on a much positive note as compared to October’s data. According to report, majority of households in the US purchased a wide range of goods, including motor vehicles. The retail sales report indicates that the US economy is sustaining enough growth which could increase the possibility of a Fed rate hike in December. However, the Federal Reserve has stated that it will be closely watching the regulation of the financial market as well as interest rates due to Trump’s fiscal spending proposals. The Fed Vice Chairman has also stated that however risky the market liquidity is at present, the liquidity is just enough to sustain the movement of the global market.