EUR/USD declined on Wednesday as the dollar strengthened in response to Donald Trump securing the majority of votes in the U.S. presidential election.
Possible technical scenarios:
EUR/USD is nearing support at 1.0672. A breakout of this level could lead to further weakening toward the 1.0614 mark, indicated by a dotted line.
Fundamental drivers of volatility:
EUR/USD continues to drop amid increasing confidence in Trump’s election victory. Anticipated protectionist policies, such as higher import tariffs and reduced corporate taxes, are strengthening the dollar and pressuring the euro.
Investors are also watching the upcoming Fed meeting closely. On Thursday, the Fed is expected to cut interest rates by 25 basis points to a range of 4.50%-4.75%, a smaller reduction than the previous 50 basis points. Jerome Powell’s comments at the press conference could provide insight into the Fed's policy direction and the impact of Trump's win on future decisions.
Intraday technical picture:
As evidenced by the 4H EUR/USD chart, it remains uncertain if the 1.0672 support level will hold against news-driven volatility. The price's stance relative to this level should become clearer in the coming days, potentially leading to updated price targets.
The GBP/USD pair faced a sell-off as the U.S. dollar strengthened following news of Donald Trump's presidential election victory.
Possible technical scenarios:
On the daily GBP/USD chart, the pair dropped from the dotted resistance at 1.3044 and reached support at 1.2846. Whether the price can hold above this level will depend on the reaction of both currencies to upcoming central bank meetings. A breakout of the 1.2846 level could open the path to the next targets at 1.2792 and 1.2656.
Fundamental drivers of volatility:
The GBP/USD pair came under pressure after Trump’s victory in key states like North Carolina and Pennsylvania. The anticipated protectionist policies of the Trump administration could slow the UK’s economic growth. Trump’s proposed higher import tariffs and corporate tax cuts may increase costs for U.S. trading partners, including the UK, making the pound more susceptible to dollar strength.
Additional pressure on the pound comes from the Bank of England meeting on Thursday, where a 25 basis point rate cut is anticipated. The U.S. Federal Reserve also plans to lower interest rates by a quarter percent on the same day.
These rate cuts could introduce volatility, but in light of Trump’s protectionism, the dollar holds a notable advantage while the pound loses ground. Investors will also look to Bank of England Governor Andrew Bailey for insights on how the UK plans to address new economic challenges and the potential impact of Trump’s victory on UK monetary policy.
Intraday technical picture:
As we can see on the 4H GBP/USD chart, it remains uncertain if the 1.2846 support level will hold; its stability will depend on fundamental factors. If the dollar’s upward momentum weakens, the price could recover to resistance at 1.2989.
The USD/JPY pair rose in response to political and economic developments in the U.S. and Japan.
Possible technical scenarios:
Judging by the unfolding situation on the daily USD/JPY chart, the pair is approaching resistance at 154.83. If this level does not halt the upward movement, growth could continue toward the next target at 157.10.
Fundamental drivers of volatility:
Recent Bank of Japan (BOJ) minutes indicated the potential for further rate hikes, causing a short-term boost in the yen. However, strong demand for the U.S. dollar and rising U.S. Treasury yields, driven by Trump’s presidential victory, are exerting pressure on the JPY. Trump’s win is fueling expectations of tighter trade policies, potentially leading to higher inflation and an increased need for U.S. interest rate hikes.
Additionally, political uncertainty in Japan may pose challenges for the BOJ in pursuing further rate hikes, despite hawkish comments from the Governor of the Bank of Japan Kazuo Ueda. Market sentiment remains uncertain regarding the Japanese regulator’s readiness to tighten policy amidst potential economic instability and emerging trade risks.
Intraday technical picture:
According to the 4H USD/JPY chart, the pair shows a limited range up to the resistance between 153.09 and 154.83. A reversal from 154.83 is possible, or a breakout could propel further growth toward the 157.10 target.
AUD/USD reached multi-month lows as the U.S. dollar strengthened on expectations surrounding Donald Trump’s policy impact.
Possible technical scenarios:
On the daily chart, AUD/USD has broken out 0.6633 and 0.6582, opening a path southward to 0.6498 and 0.6458.
Fundamental drivers of volatility:
The Republican success in the U.S. elections has driven demand for the USD, with investors factoring in potential new trade tariffs and rising inflation. Concerns over possible U.S.-China trade tensions are adding pressure on the Australian dollar, given Australia’s significant reliance on the Chinese market.
Despite a substantial decline, the AUD has limited support from the hawkish Reserve Bank of Australia, which has hinted at a potential rate hike, along with improving business conditions in China. However, the strong demand for the U.S. dollar and increasing U.S. bond yields are constraining any AUD/USD recovery.
Intraday technical picture:
The 4H AUD/USD chart demonstrates that he pair is consolidating below resistance at 0.6582. With this week’s packed news schedule, the pair may move either toward the support at 0.6498 or back up to the resistance at 0.6633.
Oil prices fell on Wednesday amid a broad-based U.S. dollar rally, as Donald Trump’s presidential victory took center stage for market participants.
Possible technical scenarios:
On Brent's daily chart, the price pulled back from resistance at 75.18, opening a potential decline toward the support level of 70.85.
Fundamental drivers of volatility:
Oil prices dropped as the U.S. dollar rose. Trump’s victory could heavily impact the oil market, as he is expected to reinstate his “maximum pressure” policy on Iran.
This could result in stricter sanctions on Iran’s oil industry, reducing the supply of low-cost oil, which accounts for about 13% of China’s imports. Consequently, the price of oil for China, the world’s largest oil importer, would rise, squeezing Chinese refineries, especially independent ones, which are already experiencing low profit margins.
Additionally, reduced Iranian oil supply on the global market is likely to push oil prices upward internationally. During his previous term, Trump’s reinstated sanctions on Iran led to the cessation of Iranian oil exports to several countries.
Intraday technical picture:
According to the 4H Brent chart, a downward reversal from resistance at 75.92 suggests the potential for prices to drop to 70.85. However, with a news-heavy week, scenarios and technical levels may be subject to updates.
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