Market Analysis: 10 November 2016
by Christala Parmaxi
US Presidential Elections
Mr Donald Trump is officially the next President of the United States! Trump was leading Clinton from the beginning although that he did not win with a serious advantage. The market overreacted during the reporting of the states’ votes leading to the volatility similar to the one we saw back in June during the Brexit vote. For instance, within 5 hours the Euro jumped 300 pips against the greenback, before the results officially came out. Once Mr Trump had his first speech as the President Elect, the market recovered and the US Dollar ended up in gains, i.e. the EURUSD fell by 400 pips from 1.13 to 1.09. Today the forex market is consolidating, in an effort to digest the new information and Donald Trump as the next US President. The graph below represents the daily change of the US Dollar against the G7 from the volatile time of 03:00 am server time November 9th to 03:00 am server time of November 10th. In most of the cases the pairs recover the overreaction of the reporting of results per state within the next day. The most notable pairs that did not recover fully within the last day was the commodities pairs and of course USDMXN.
Reserve Bank of New Zealand
The RBNZ had its policy meeting yesterday where they decided to cut the interest rates by 0.25% from 2% to 1.75%. This action was widely expected by market participants; however the Bank signaled that this may be the last rate cut for a longer timeframe until deemed necessary again. Thus, at the time of the announcement the Kiwi surged by 65 pips against the US Dollar instead of falling due to the rate cut. Immediately after the next few hours it lost its bullish momentum once market digested the new information. On the short timeframe the NZDUSD is bearish but on the long term and the daily timeframe the pair is still bullish.
The economic calendar is light for the rest of the week. Today there is a speech by ECB Vice President Vitor Constancio and tomorrow there is one by the Governor of the Bank of Canada Stephen Poloz.
The Kiwi broke SMA200 to the downside a few hours after the RBNZ rate cut announcement. MACD is slopping downwards below the equilibrium level while RSI is moving down to its oversold level. We expect the price to walk on Bollinger lower band for a while and then return back to its long term uptrend. The valid support levels are near 0.724 and 0.7175 and the valid resistance levels are near 0.7295 and 0.7335.
On daily timeframe, the overview is still bullish with the price trading above the triple SMAs and Bollinger’s middle band. RSI is slopping upwards above 50 and MACD is moving above its trigger line on bullish territories. The valid supports are near 0.7115 and 0.7055 while the resistance levels are near 0.7355 and 0.7455.
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