USD will resume its downward trend after elections

Trading 03 Nov 2020 Commentaire »

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The US dollar increased to a 4-week high last Friday, while it traded mostly in narrow ranges in October. Investors move quickly to defensive assets, since they are worried that the results of the election would eventually be challenged in court. The situation with the development of the pandemic, which threatens new economic damage, has added pressure.

Today, the dollar index declined again. It is expected that short positions in the US currency will remain, and may increase immediately after the presidential elections.

In a Reuters poll conducted from October 27 to November 2, nearly 70% of respondents said that net short dollar positions would remain the same or that the number would rise immediately after the election, while a few of the respondents shared the opposite opinion.

In another poll, more than 50% of survey participants (39 out of 50 analysts) said the election result in the next few weeks will be the greatest impulse of the dollar's growth. In this regard, the spread of COVID-19 will fade into the background. The re-election of the current president with the preservation of the Republican Senate is unlikely, but this could lead to a significant strengthening of the dollar.

Experts believe that the dollar's oversold condition suggests that President Trump's surprising victory could easily have a significant effect of reducing short positions on the USD.

However, the most extensive poll, involving more than 70 analysts, pointed out that the dollar will weaken next year.

In turn, if Biden wins the election, the US dollar is expected to decline, which is partly because of the rising expectations of a large aid package for the US economy under the Democrat's presidency.

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The euro should support this scenario. The single currency has collapsed recently due to the rally in the dollar and the re-introduction of quarantine in some parts of Europe. In October, the euro sank by 0.6% against the dollar. However, the exchange rate increased by almost 4% over the year. The nearest target for buyers of the EUR / USD pair is 1.18. Over the course of the year, the rate should increase by at least 4%. Thus, the forecasted growth above the level of 1.20 is still relevant.

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Analysts say that the euro, which is fairly the story of COVID-19, has not been affected as much as expected.

As for the current realities, a positive background is being formed. The upward trend in the commodity market should support the Euro, since the Eurobloc currency is correlated with metals and energy carriers.

On another note, the US Financial Department seized $ 73.7 billion through the placement of Treasury securities the day before. This is the highest number in the last month. It was known that large-scale operations of the Ministry of Finance lead to the growth of the US currency, but operations of a similar scale are not expected in the coming week. Yesterday, the volume of repayments exceeded the volume of placements by $ 9.9 billion, which will slightly put pressure on the position of the US dollar.

The material has been provided by InstaForex Company - www.instaforex.com

US elections takes place today

Trading 03 Nov 2020 Commentaire »

US presidential elections are taking place today: some polling stations have already been working for several hours, while some have recently opened, depending on the state and time zone. It is difficult to overestimate the importance of this event, including in the context of the currency market. The head of the American state, in particular, has broad powers in determining foreign policy, and also submits to Congress for approval the candidacy of the Fed Chairman. That is, the curve of the development of the trade war with China will be determined and ministers and key advisers including on economic issues will be appointed or reassigned, depending on who will take the White House. In addition, Federal Reserves' Chairman, Jerome Powell, whom Trump so persistently wanted to remove last year, ends in 2022. In other words, America is on the verge of political changes, which will clearly affect the US dollar.

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Much speculation roams around in the press about how the dollar will behave if Biden wins or Trump wins – figuratively speaking, which candidate is "more profitable" for the dollar bulls. However, this reason is too unclear: as a rule, experts discuss a long-term time period. But if we consider the medium-term prospects of the US currency, in the context of the EUR/USD pair, then several other fundamental factors come to the fore.

Traders will not discuss global issues, but rather more common issues in the coming days (and possibly weeks). Moreover, the fundamental background for the EUR/USD pair will depend on simpler things: a) whether the clear winner of the election will be determined based on the results of the vote; b) whether the losing candidate recognizes his loss. The news stream will revolve around these two common questions, while the market will discuss the foreign policy and other intentions of the 46th US President much later.

Therefore, today's attention of EUR/USD traders should be focused not on macroeconomic news, but on American news feeds. As you know, the results of elections in the United States are determined not by the majority of votes, but by their distribution in the electoral college, the number of which for a particular candidate depends on the voting in specific states. There have been cases where a candidate won a nationwide majority but lost an election, such as Al Gore in 2000 and Hillary Clinton in 2016.

That is why the objects of "increased attention" are traditionally the so-called "wavering States". In most cases, the election results will depend on voting results in eight fluctuating states: Florida (29 electors), Pennsylvania (20 electors), Ohio, Georgia, Michigan, North Carolina, Arizona and Wisconsin. Generally, these states will give 135 electoral college votes. The key states to watch out for on election night are Pennsylvania and Florida. If Trump's victory in these states is not confident (not to mention losing), then the chances for an overall victory will decline and vice versa – if he stalked these key regions of the country, the intrigue of the elections will continue. According to polls that were conducted before the election, the above States recorded around the same level of support for candidates from both parties (with a slight margin in favor of Biden).

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In view of this, experts advise to be patient and not to jump to conclusions before counting all the votes. According to statistics, Biden voters are more likely to vote by mail, whereas supporters of the Republicans prefer to personally drop the ballot into the ballot box. Therefore, at the beginning of the counting of votes, it may seem that one of the candidates is gaining a landslide victory, depending on which ballots are processed faster. However, we should not trust the dollar's fluctuations during the counting of votes, as there is a very high risk of running into false currency movements. Usually, the name of the next president in the United States is known on election night, but this year's announcement of the winner may be postponed for several days.

The fact is that many Americans voted early this year due to COVID-19 and approximately two thirds of all early votes are mail. It is their calculation that can delay the whole process and the moment of declaring the winner. It is also worth considering that different states of America have different laws. For example, in Florida and North Carolina, it is allowed to start counting ballots in the mail before Election Day. Local officials promise to deal with this quickly. But in Pennsylvania, Wisconsin and Michigan, you can start counting votes only on election day. Therefore, in these states, the publication of official results may have to wait.

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It is also worth recalling that in addition to the US presidential elections, elections for the Senate, House of Representatives and governors in 11 American states are also held today. The Americans will decide the fate of 35 Senate seats. This election could change control of the Upper House of the US Congress, where the majority belonged to the Republican Party until today. If the Democrats can change the situation with Biden's victory, then the Democratic Party could then "lobby" a new $ 2.2 trillion stimulus package (the document was already approved in the House of Representatives last month). However, it will be difficult to predict the first reaction of the US dollar to this win. In this case, everything will depend on Trump's behavior. If he does not admit a loss, then the electoral process will actually continue in the courts.

As a result, the next day will be at least very stressful for traders of the EUR/USD pair (in fact, as for all traders of dollar pairs). A clear and unambiguous election result will put pressure on the US currency (which is used as a defensive asset), which will lead to a sharp rise in the EUR/USD pair. In particular, this explains the current correctional upward pullback of the EUR/USD to the 17th figure. According to American journalists, Biden was still able to turn the situation in his favor in the wavering States during the last days of the election campaign. However, these assumptions may not be confirmed, so long positions as well as short ones do not look reliable. Before the voting and counting process is complete, trading dollar pairs is more like a game of roulette, since the election results (as well as Trump/Biden's reaction) is impossible to predict.

The material has been provided by InstaForex Company - www.instaforex.com

GBP/USD. Too early for the market to write off the dollar

Trading 03 Nov 2020 Commentaire »

The pound shows increased volatility against the dollar. The GBP/USD pair was at the bottom of the 28th figure yesterday, that is, at 5-week price lows, while the bulls are approaching the 31st price level today. Nearly 300-point price swings are relatively rare even for a pair like the pound-dollar. Therefore, it is necessary to understand the reasons for such volatility in order to assess the future prospects for GBP/USD.

As a rule, the British currency reacts so sharply to news related to Brexit. Negotiations between London and Brussels are ongoing, so positive signals from this front could well provoke a growth impulse on the pair. But this time the dollar was the main culprit in the GBP/USD volatility. Presidential elections are taking place in the United States today, so all of the greenback's hesitations should be viewed through the prism of this fateful event. In the context of the presidential election, the US currency is seen as a defensive asset. And the higher Biden's chances of an unambiguous and undeniable victory, the lower the market's interest in the dollar, as well as in other protective instruments. This explains the current dynamics of dollar pairs - the greenback is losing ground (to one degree or another) in almost all of them, and most actively it concerns the GBP/USD pair.

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The fact is that the first news from the polling stations speaks of the advantage of the leader of the Democrats. According to the American press, Trump is ahead of Biden in several key states, but Joe Biden remains in the lead. Thus, the current US president is slightly ahead of his opponent in three key states. The head of the White House is leading in Ohio (47.4% versus 46% for Biden), North Carolina (47.8% versus 47.6%) and Iowa (47.6% versus 45.6%). However, Biden is ahead of Trump in Pennsylvania (48.7% versus 47.5%), Florida (47.9% versus 47.0%), Michigan (50% versus 45.8%), Arizona (47.9% versus 47 .0%) and Wisconsin (51% vs. 44.3%). According to the majority of experts, the most important victory is in two states - Pennsylvania and Florida - therefore the market reacted to the above news with a sell-off of the dollar. The defensive asset turned out to be unclaimed, while the interest in risk increased. The market regards Biden's victory as a signal for more significant fiscal stimulus and better international relations (primarily with China), so the US stock market is growing, while the greenback's status as a safe-haven is decreasing.

But traders should be warned against premature trading decisions, especially against the US currency. The current situation is fraught with many pitfalls, many of which can radically change the mood of investors. Firstly, the above figures are not the results of the vote count, but the results of a poll conducted by the RealClearPolitics resource literally on the eve of voting day. Second, nearly 60 million American voters chose to vote by mail. The process of counting mail ballots is slower (compared to live ballots from polling stations), while according to statistics, remote voting is more preferred by supporters of Democrats. This means that on the night of the counting of votes (the period of the European session on Wednesday), Trump may take the lead. Accordingly, the dollar will strengthen again - also against the pound.

Thirdly, the very fact of Biden's victory does not guarantee further growth of GBP/USD. In this case, everything will depend, firstly, on how far the Democrat will defeat the Republican, and secondly, on the position of Trump himself. The greenback will be under pressure if Trump admits his loss and quietly, peacefully, nobly prepares for the transfer of power. But if Biden's victory is not convincing, the incumbent president may get involved in a legal battle, challenging, in particular, the results of the mail vote (earlier he had more than once this method of voting, pointing out possible falsifications).

It is worth recalling here that in 2000, when George W. Bush and Al Gore were contenders for the presidency, the country lived in limbo for several weeks. The elections were held on November 7, and the name of the new president was determined only on December 12. Moreover, it was not the election commission that said the decisive word, but the US Supreme Court. According to a number of American experts, Trump may repeat this path, plunging the country into a regime of political uncertainty. In other words, if Trump's reaction to Biden's victory is belligerent, then the dollar could once again regain its status as a favorite in the foreign exchange market.

Thus, the growth of the GBP/USD pair is fragile and should not be trusted. The dollar is in limbo, while many investors make hasty conclusions, getting rid of the greenback. History knows several examples when pre-election polls did not justify themselves. For example, this happened in 2016, when Hillary Clinton was leading at the national level, but in the end she lost to Donald Trump. Such is the specificity of the electoral system in the United States. Whether Trump will be able to repeat such a somersault is an open question. Therefore, it is too early to write off the US currency.

The material has been provided by InstaForex Company - www.instaforex.com

Analytics and trading signals for beginners. How to trade EUR/USD on November 4? Getting ready for Wednesday session

Trading 03 Nov 2020 Commentaire »

Hourly chart of the EUR/USD pair

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After leaving the descending channel, the EUR/USD pair immediately started a strong upward movement on Tuesday, November 3, and was in it all day. Therefore, those novice traders who followed our morning recommendations, namely to trade up, are currently in profit from around 40 to 70 points. The MACD indicator did not turn down during the entire day, so traders could either take profits near the target levels, or wait for the MACD indicator to turn down. In any case, novice traders have profit, and we congratulate them on this. As for the future prospects for the euro/dollar pair, after such a strong growth it would be nice to correct a bit to the downside. However, we remind traders that the elections in America are not over yet, for another 5-6 hours, Americans will continue to come to the polls, respectively, and the markets can continue to trade quite actively. The same applies to tomorrow, when volatility can be very high, and there can also be sharp reversals in the pair. You can leave long positions on the MACD downward signal if traders want to try to extract the maximum profit from open trades.

No major macroeconomic publications or other events scheduled in the US or the EU on Tuesday. Markets were entirely focused on the elections. Actually, this event alone was enough for the pair to trade actively all day. So far, no riots or clashes have been reported among the US population. Recall that many media outlets predicted riots on election day. However, at the moment everything is going on in the most cultural and civilized way. Nearly 100 million Americans voted early or by mail.

The European Union and America will publish business activity indices for the services sector on Wednesday, November 4. The index is forecast at a fairly high level in the United States - 56 (Markit) and 57.5 (ISM). But the situation with business activity in the service sector is much worse in the European Union. It began to fall back in July this year, and it went below 50.0 in September, below which, we recall, it is believed that the industry is contracting. Well, with the introduction of the new lockdown in many European countries, the service sector suffered the most once again. Therefore, based on these publications, the euro is unlikely to receive market support. In addition, the ADP report on the change in the number of employees in the private sector will be published in the United States, which is similar to the NonFarm Payrolls indicator. The forecast is +650,000. However, whatever the real value, we believe that tomorrow traders will also make decisions based on data from the American elections.

Possible scenarios for November 4:

1) Buy positions on the EUR/USD pair are still relevant at the moment, since the price has settled above the descending channel. However, in order to open new long positions, it is necessary for the pair to correct to the downside now, and the MACD indicator discharges slightly downward, preferably to the zero level. As for long deals that are still open, they can be closed by the MACD signal down or you can do it right now.

2) Trading for a fall at this time has ceased to be relevant, since the price failed to overcome the 1.1623 level and left the descending channel. Therefore, now it is necessary to expect a new downward trend or an eloquent completion of an upward trend, and only after that should you consider the options for opening short positions. In general, not in the near future.

On the chart:

Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.

Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.

The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).

Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.

Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.

The material has been provided by InstaForex Company - www.instaforex.com

U.S. Factory Orders Jump Slightly More Than Expected In September

Trading 03 Nov 2020 Commentaire »

New orders for U.S. manufactured goods showed a significant increase in the month of September, according to a report released by the Commerce Department on Tuesday.

The Commerce Department said factory orders jumped by 1.1 percent in September after rising by a revised 0.6 percent in August.

Economists had expected factory orders to surge up by 1.0 percent compared to the 0.7 percent increase originally reported for the previous month.

The report said orders for durable goods spiked by 1.9 percent, while orders for non-durable goods rose by 0.3 percent.

Shipments of manufactured goods increased for the fifth consecutive month, rising by 0.3 percent in September following a matching uptick in August.

Meanwhile, the Commerce Department said inventories were virtually unchanged in September after coming in nearly unchanged in the previous month.

The inventories-to-shipments ratio subsequently edged down to 1.42 in September from 1.43 in August.


The material has been provided by InstaForex Company - www.instaforex.com

*U.S. Factory Orders Jump 1.1% In September

Trading 03 Nov 2020 Commentaire »

U.S. Factory Orders Jump 1.1% In September


The material has been provided by InstaForex Company - www.instaforex.com

GBP/USD : la livre en proie à de fortes variations

Trading 03 Nov 2020 Commentaire »
Plusieurs éléments cette semaine sont susceptibles de faire varier la livre contre dollar : Elections US, Brexit, réunion de la banque d’Angleterre.

USD/CAD : le dollar canadien se renforce face au dollar américain

Trading 03 Nov 2020 Commentaire »
La hausse du cours du pétrole soutient le dollar canadien.

Latvia Industrial Production Grows In September

Trading 03 Nov 2020 Commentaire »

Latvia's industrial production rose for the first time in three month in September, data from the Central Statistical Bureau showed on Tuesday.

Industrial production rose a seasonally adjusted 0.5 percent month-on-month in September, reversing a 0.5 percent decline in August.

On a yearly basis, industrial production decreased a calendar adjusted 2.8 percent in September, following a 2.9 percent decline in the previous month.

Manufacturing output declined 0.6 percent annually in September, while it grew 0.8 percent from the previous month.

Production in mining and quarrying output grew 21.8 percent, while those of electricity and gas supply declined 22.7 percent.


The material has been provided by InstaForex Company - www.instaforex.com

Ichimoku cloud indicator Daily analysis of EURUSD

Trading 03 Nov 2020 Commentaire »

EURUSD is back testing cloud resistance after breaking below it. Price is showing signs of strength as we have moved back inside the Kumo (cloud) and we see bulls challenge the tenkan- and kijun-sen indicators).

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I believe this bounce is only a pause to the correction that has started since the bearish reversal at 1.20 back in August. As long as price is below 1.1870 I see any bounce as selling opportunity. Looking closely bulls need to recapture 1.1750. Bears only want to see price get rejected at current levels and then more selling will follow. The tenkan-sen (Red line indicator) is crossing below the kijun-sen (yellow line indicator). This is a bearish sign. But with US elections on the way, we focus more on the weekly close rather than the daily or intraday price movement. The material has been provided by InstaForex Company - www.instaforex.com