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The USD continued to weaken on Monday against its counterparts in the aftermath of the release of the US employment report for October on Friday, while US stockmarkets continued to gain. On a fundamental level we note the midterm elections that could shift the market’s opinion as well, as they may affect the US Government’s fiscal plans. It should be noted that the midterm elections were usually considered to be a vote of protest, a reality check if you prefer, for the incumbent President. For the time being the Democrats control both houses of Congress, the Senate and the House of Representatives, yet Republicans seem to be positioned to take control of the Senate. Such a scenario may leave the US with a split Government in other words, a Democrat President and a US Congress with a Republican veto. The issues which seem to be hot, albeit are not the only ones, are the economy and the high level of retail prices, abortion rights, immigration, Joe Biden’s presidency so far and its future and to a lesser degree education, climate, public safety and gun control. Should the Republicans be able to take control over Congress, they may put the brakes on Joe Bidens’ extensive fiscal plans, which in turn could increase the possibility of the US economy entering a recession. Across the pond we note that the pound was able to gain against the USD, the EUR, JPY and CHF in a sign of a broader strength, yet the market’s attention may still be on the prospect of a deep recession for the UK economy. It should be noted that next week UK finance minister Jeremy Hunt, is expected to make the autumn statement and is expected to announce spending cuts and possibly substantial tax hikes. It was characteristic that BoE’s chief economist Hugh Pill stated that a tight fiscal budget could weigh on the UK economy even more than what the central bank expects and may alter BoE’s policy intentions. Furthermore, we would note that UK house prices contracted for a second month in a row and at the fastest rate since June 2021 in another possible sign of lack of demand for the UK housing market which intensifies worries further for the outlook of the UK economy.
EUR/USD was on the rise yesterday breaking the parity level (S1), which acted as a resistance line, now turned to a support line. Given that the pair seems to have broken the upward trendline guiding it since Friday, we switch our bullish outlook in favour of a sideways movement initially, yet we note that there are still bullish tendencies for the pair. Should the bulls actually retake control of EUR/USD’s direction ,we may see it breaking the 1.0095 (R1) resistance line in search of higher grounds. Should the bears be in charge of EUR/USD’s direction we may see the pair breaking below the parity level (S1) once again and aim for the 0.9900 (S2) support level.
GBP/USD rose yesterday, breaking the 1.1460 (S1) resistance line, now turned to support. Given that the rise seems to have calmed down and the RSI indicator seems to stabilise, we tend to switch our bullish outlook in favour of a sideways movement bias, for the time being. Should cable find fresh buying orders along its path we may see it breaking the 1.1640 (R1) resistance line and advance higher. Should the current stabilisation imply that the pair has peaked and a selling interest be expressed by the market for GBP/USD, we may see the pair breaking the 1.1460 (S1) support line and aim for the 1.1275 (S2) level.
Other highlights for the day:
Today in the European session we get Eurozone’s retail sales for September while on the monetary front we note that Germany’s BuBa President Nagel, from Switzerland SNB Chairman Thomas Jordan, ECB’s Enria and BoE chief economist Pill are scheduled to make statements. In the late American session we note the release of the US API weekly crude oil inventories figure and a bit later we get New Zealand’s electronic card sales for October. During tomorrow’s Asian session, we note the release of Japan’s current account balance for September and China’s inflation metrics for October.
EUR/USD H4 Chart
Support: 1.0000 (S1), 0.9900 (S2), 0.9810 (S3)
Resistance: 1.0095 (R1), 1.0195 (R2), 1.0290 (R3)
GBP/USD H4 Chart
Support: 1.1460 (S1), 1.1275 (S2), 1.1110 (S3)
Resistance: 1.1640 (R1), 1.1860 (R2), 1.2000 (R3)
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JA 
