The US dollar (USD) accelerated its rally this Wednesday ahead of the US opening bell, driven by uncertainty ahead of the US presidential election and safe-haven flows after stocks expanded their pessimistic performance. Meanwhile, US bonds continue to sell, meaning US interest rates are rising with the 10-year benchmark US index rising from 4.07% on Monday to 4.23% on Wednesday. The royal dollar is back on the scene and may accelerate further as uncertainty grows Before the November 5 elections
On the US economic front, markets await a very light calendar on Wednesday. Aside from the existing home sales figures, there is really nothing from an economic data standpoint that can change the current situation. Instead, look at US earnings as Tesla, IBM, Boeing and Coca cola are set to issue dividends.
The US dollar index (DXY) is rising again, and October is set to close on a very high note in what appears to be a very strong rally. The US dollar is back on the scene as traders finally rally and start positioning themselves for the US elections on November 5 and the US Federal Reserve’s interest rate decision on November 7. It’s one of the heaviest weeks of this fiscal year, and the US dollar seems to be the place to be before these two events.
The US dollar index broke through the 104.00 level and is now in empty territory that could quickly see the 105.00 level appear as the first ceiling on the upside. Once this level is surpassed, watch out for pivot levels 105.53 and 105.89. In the end, 106.52 or even 107.35 may show sharp resistance and selling pressure with take profit rising at these levels.
Bond Market Impact Boosts Dollar Strength, Pressures EUR
The impact of the bond market began to be felt in the early hours of Wednesday morning, as we see the US dollar outperforming almost everything in the markets.
The bond market is arguing with the Fed, as the Fed may have made a policy mistake by cutting interest rates by 50 basis points. This is the situation where people seek the greatest return, which people thought was coming from the United States.
The euro has fallen again and is now below the last support level in the form of 1.08 as interest rates in America continue to rise. Because of this, I think you have a situation where traders will continue to run towards the USD, so I think we may continue to fall. I was a bit surprised that we haven’t consolidated prices a little longer, but it’s clear that the bond market is starting to lead the attack. At this point, it won’t surprise me at all to see a drop to 1.07, and maybe even 1.0650. I have no interest in buying this pair, at least not for now.
Of course, USDJPY has risen and threatens the 153-yen level at the time of registration. The market has turned sharply lower and now looks like it will try to reach the 155-yen level. However, we are nervous and there is a large range of noise somewhere around the 154 yen level. So, I think you’re in a situation where you need to be a little cautious here about jumping into the market and chasing this move.
If you are already long-term USDJPY, and you should be if you are following my analysis now
Japanese yen weakens, Nikkei suffers losses as political anxiety mounts
The US dollar rose as the Japanese yen and the Nikkei took heavy hits this week as political uncertainty ahead of Japan’s snap elections appeared to have shaken investor confidence. The yen’s slide against the dollar accelerated to 153 while the Nikkei ended the day with a sharp loss of more than 300 points. Prime Minister Shigeru Ishiba’s dissolution of the House of Representatives earlier this month paved the way for the October 27 House of Representatives elections. Fears are growing that the ruling Liberal Democratic Party (LDP) and its coalition partner, Komeito, could lose their majority, adding to political instability in an already fragile market.
Added to the weakening of the yen is the obvious political vacuum regarding currency intervention. Despite the yen’s rapid depreciation, Japanese authorities have remained unusually silent, offering no verbal intervention to stop the decline. Traders interpreted this silence as tacit approval to continue selling the yen without fear of an official reaction. Unless there is a major shift in policy communications by Japanese officials, the yen may face more downward pressure throughout the week, at least until the election results provide a clearer direction on Japanese politics.
Across the broader forex market, the dollar continues to extend broad-based gains, benefiting from higher yields and expectations of a slower pace of easing by the Fed. The Canadian dollar is the second strongest performer, as markets await interest rate cuts by the Bank of Canada, updated economic forecasts, and any signs of future policy easing. The yen, the worst performer this week, is facing heavy losses. The Australian and New Zealand dollars are also under pressure, as their declines have gained momentum group.
Technically, the NZD/USD pair is gaining bearish momentum with the decline from 0.6378 continuing.
