The Forex market is trading in ranges so far this week as the US presidential election result is still looming. The U.S. dollar is extremely well bid on all currency pairs and if there’s any dip, it is poised to be bought.
IT is the NFP week and attention will focus on the Friday’s number as the FED is poised to hike rates this December. the U.S. GDP (Gross Domestic Product) has just been released and it came at 3.2% on 3% expectations, making bulls feeling even more confident a FED rate hike is coming.
However, the NFP is not the dominant driver in the markets this week as on Sunday, the Italian constitutional referendum is due and, based on what the polls are suggesting, one way or the other the Forex market will open with a gap next Monday. Moreover, the ECB (European Central Bank) is due next week and more easing is expected to be announced.
That being the case, it is possible that the whole week until the Friday’s NFP release the market will keep its levels, even though on some pairs the moves may look like being aggressive. Such an example is being offered by the EURJPY and the USDJPY pairs.
While the start of the week saw the pairs trading lower, more than a big figure in both cases, Tuesday so far the two JPY pairs recovered all the previous dip. Hence, ranges are still and probably will be here for the rest of the week.
Let’s keep in mind also the fact that the end of month flows will influence trading this Wednesday as the last trading day of the month should see volatility picking up, especially around the main fixing times. By the time London goes home tomorrow, we should be in full NFP mode.
As for the equity markets, the U.S. indexes are still enjoying the Trump rally while in Europe the euphoria is not shared due to the political uncertainties ahead in Italy and, later in the year, in Austria. To add fuel to the fire, the OPEC decision to freeze/or not production is expected as well, and until then, the CAD pairs are on a terribly long consolidation.
From a technical point of view, the Euro is being sold aggressively on every bounce as ECB hinted to be dovish next week, with the EURUSD being the main driver of the move. Expect the same trend to continue moving forward. All in all, by the time November ends, market participants will shift focus towards the NFP and ECB next week, events that are doomed to bring more volatility on the markets.