Australia | Nov 07 2012
Max Ludowici of 708 Capital is visiting clients today and as such is unable to produce his regular report. Max will return tomorrow. Chris Tedder of Forex.com provides FNArena with an assessment of market response to the US election, with the Obama victory unconfirmed at time of writing.
By Chris Tedder, Research Analyst FOREX.com
The US presidential election completely overshadowed the little amount of regional data out of Asia. USD was bolstered early in the session with initial results favouring Romney, with investors’ attempting to anticipate a republican win and the possible end of QE3. However, Obama fought back by winning a few key states, inducing what many are calling the final nail in Romney’s coffin, Ohio. The result, USD has sold-off hard and investors are flocking to gold, hallmarks of an Obama win.
Price action is very jumpy
USDJPY was a big loser, which is not surprising given how sensitive this pair to movements in treasury yields. The pair pushed through a resistance level around 80.00, before creating a session low around 79.80. Late in the session, however, a flock towards risk currencies sent investors away from JPY.
XAUUSD [US dollar gold] was also extremely jumpy throughout the session, which is to be expected given the pair is often referred to as the ultimate QE play. When the market expects the US Fed to turn on the printing press again, then gold is usually one of the biggest beneficiaries. Investors typically start to shed USD in favour of XAU. Hence, the jumpy price action today in XAUUSD as the market kept pace with the presidential debate.
Price action suggests Obama has done enough
On the whole, the market is leaning towards Obama retaining the presidency.
Data watch
In New Zealand, RBNZ Governor Wheeler was on the wires, focusing his comments on the persistently and detrimentally high NZD. The governor was very adamant that the kiwi was having an unfavourable impact on NZ’s economy, particularly through trade exposed sectors, but added he can’t see a big NZD sell-off. Nonetheless, in the current environment of caution over risk, investors dumped NZD on the back of Wheeler’s comments.
AUDUSD feed off a late USD sell-off but is currently limited by a significant of downside pressure stemming from a still dovish RBA. EURUSD ran away later in the session, after it appeared Obama had done enough and ECB President Junker stated Greece’s parliamentary vote later in the week will pass, thereby securing Greece’s place in the Euro, at least for the time being.
All eyes will likely remain on the US as the election winds down. After which the market may turn its attention to the ramifications of said election, whilst also keeping an eye on the wrangling in Greece.
Republished with permission from the publisher. The views expressed are the author's and not by association FNArena's.
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