Forex Market Outlook after US Election
10 months ago forexsimulation 0
After the US election had held it created ripples in major currency markets of the world. Below is the summary of how various currencies reacted to the election.
The EURUSD pair has been falling since the result of the US election. The US president Donald Trump plans to increase fiscal spending and cut taxes which will increase the pace of economic growth and inflation. If the inflation climbs faster than expected, Fed will have no any other options than to bring a tighter monetary policy.
The greenback’s bullishness is also supported by the expectations of the rate hike by Fed next month. Last Thursday Fed Chair Janet Yellen reminded of a possible rate hike next month by saying “could well become appropriate relatively soon.” The US dollar index, which measures the strength of US dollar against the basket of major currencies of the world rose from 97.00 to 101.00 within two trading weeks.
The greenback has depreciated 400 pips against the single currency since the day of US election. EURUSD market fell for consecutive 10 days before gaining 55 pips on Monday. The market bounced from the 2014 November support around 1.0570 on Monday.
EURUSD, on the daily timeframe, is trading well below 50-day simple moving average and 21-day exponential moving average. The RSI has submerged into the oversold territory. The immediate support for the EURUSD lines up at 1.0567. Upon breaking below the mentioned level, the pair will decline further to test the lows of April 2015 around 1.0480. As the market bounced significantly on Monday it is still not sure if the market will break below its weekly lows. Any significant breakout below the 1.0570 levels might be the fresh selling opportunities.
EURUSD on 15 Minute Chart
EURUSD is still trending upward in 15 minute chart, having formed consecutive higher lows. However, there wasn’t enough bullish momentum to break above Monday’s high. While the longer term outlook for EURUSD is bearish, this up trending pair on shorter time should break above this up trend line (look at the chart). According to the 15 minute chart, the immediate up side hurdle for this pair is at 1.0647 and the immediate downside support is at 1.0605. The RSI is hovering around 60. As of writing, the market is trading above the 21 and 50-day moving average.
GBPUSD didn’t react as much as EURUSD after the election. GBPUSD gained 200+ pips for the three consecutive days after the election but all the gained erased within next week. Currently, GBPUSD is playing sideways in the midterm. The down trending GBPUSD has been in a corrective mode since Monday and it’s still not sure if the market will continue falling from the current levels. Price pulled back from the 50-day moving average on the daily chart and the 21-day exponential moving average has worked as a support around 1.2422. The relative strength index is flirting around the level of 50.
FOMC minutes report is due to be released tomorrow and the market is likely to experience some volatility. The GDP report of UK which will come out on Friday will be closely looked by the forex traders because it might create some trading opportunities for the traders.
A break above the 1.2672 levels will encourage the pair to 1.27 whereas, on the downside, a break below 1.2312 will extend losses to 1.21 levels. In the long run, GBPUSD is likely to be on a downward trend as the Fed is mostly likely to hike the rate next month.
USDJPY faced strong resistance around 111.30 levels. The recent surge seen in this pair is mainly due to the stronger greenback. On the daily chart, the RSI has already entered into an overbought territory. The 21-day moving average and 50-day moving average are well below the current market price. Although the overall USD direction is down, current upward bounce seems impressive. The market has been quite an indecisive today (Tuesday). The upside immediate difficulties line up at 111.22. If the market becomes stable above mentioned level, it will shoot higher to test 111.33, 112.00 and so on.
Greenback rose strongly against the Australian dollar this week. AUDUSD has already crossed above the 21-day EMA on the 4-hour chart. The gains in commodity prices had provided some fundamental support for the Aussie. While the long-term outlook is still bearish for the Aussie, the midterm direction is up. The bullish momentum seen in the 1-hour chart is worth watching and there exist several opportunities for the AUDUSD long position holders. However, trading against the trend is always a risky thing to do. Downside reversal can be expected in near future.
According to the daily chart, the major support for the pair is around 0.7313 levels. On the other hand, Aussie might face resistance around the 0.7440 (July and September’s support). In short, the market might move sideways inside the range of 0.7440 and 0.7310 this week.
The daily time frame suggests that the USDCHF is on the verge of testing its high of January around 1.0240. In short term view, Swiss franc remains in a consolidation phase. USDCHF surged as much as high as 550 pips after the US election. The possibility of the rate hike by Fed next month is one of the reasons for its recent impressive upward movements. There is still enough ground for the pair on the upside as the greenback has tested 1.0110 levels several times during the last two days (including today), struggling to break the barrier.
The 21-day exponential moving average seems to be providing a strong support for USDCHF on H4 chart. The RSI is hovering around overbought territory on the daily chart. In the mid-term perspective, the support for the USDCHF is at 1.0084 and the next support is at 1.0074. On the upside, the resistance is at 1.0115 which is likely to be broken soon. After that, the ultimate resistance will be 1.0240 and 1.0315. The short term traders might find long opportunities in this pair when the market pulls back.