Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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NY Open: Fading the 'Blue Wave' dollar retreat
Michael O’Neill
FX Trader, Loonieviews.net
Summary: The Democratic 'Blue Wave' proved a mere ripple in the US midterms, and the dollar is clawing back its post-vote losses. Meanwhile, a jobs report bonanza in New Zealand could potentially see a hawkish tilt from the RBNZ, so the kiwi is in focus.
The “Blue Wave” wasn’t. The heavily hyped predictions that US Democrats would gain at least 40 seats in the House of Representatives and even possibility secure a majority in the Senate proved to be wishful thinking. The wave was just a ripple.
The initial reaction to sell dollars led to USD opening in New York with losses against the G-10 majors. The losses are being slowly clawed back in early trading as the greenback is higher across the board, except against the Canadian dollar which is unchanged. It may just be profit-taking unless the US dollar index can take out support in the 95.25-40 area, which would spark additional US dollar demand.
The EURUSD rally stalled at 1.1498, the September downtrend line which guards significant resistance in the 1.1540-50 zone. The European Central Bank may be contemplating tightening, but an actual rate hike isn’t expected until sometime in the summer of 2019. Meanwhile, the Federal Open Market Committee policy statement is released tomorrow. No one expects a rate increase, but last Friday’s robust nonfarm payrolls report leaves the door open for a hawkish-sounding announcement.
USDNZD is in the spotlight. The far better than expected employment data could lead to a less dovish than usual Reserve Bank of New Zealand policy statement after the New York close. If so, NZDUSD could take out resistance at 0.6795 (the 38.2% Fibonacci retracement level of the May-October range) and target 0.7020 (61.8% Fibonacci retracement level)-
USDCAD traders ignored the better than forecast Ivey PMI data (Actual 61.8 versus a forecasted 50.9). The data series is volatile but occasionally spurs an FX reaction. It may limit USDCAD gains in the short term.
Wall Street opened in positive territory and added to the gains. Conventional wisdom suggested that the Democrat win would be bad for stocks as they could try to roll back tax cuts. For the moment, traders don’t see that as an issue, preferring to believe that a gridlocked Congress is good for equities.
The initial reaction to sell dollars led to USD opening in New York with losses against the G-10 majors. The losses are being slowly clawed back in early trading as the greenback is higher across the board, except against the Canadian dollar which is unchanged. It may just be profit-taking unless the US dollar index can take out support in the 95.25-40 area, which would spark additional US dollar demand.
The EURUSD rally stalled at 1.1498, the September downtrend line which guards significant resistance in the 1.1540-50 zone. The European Central Bank may be contemplating tightening, but an actual rate hike isn’t expected until sometime in the summer of 2019. Meanwhile, the Federal Open Market Committee policy statement is released tomorrow. No one expects a rate increase, but last Friday’s robust nonfarm payrolls report leaves the door open for a hawkish-sounding announcement.
USDNZD is in the spotlight. The far better than expected employment data could lead to a less dovish than usual Reserve Bank of New Zealand policy statement after the New York close. If so, NZDUSD could take out resistance at 0.6795 (the 38.2% Fibonacci retracement level of the May-October range) and target 0.7020 (61.8% Fibonacci retracement level)-
USDCAD traders ignored the better than forecast Ivey PMI data (Actual 61.8 versus a forecasted 50.9). The data series is volatile but occasionally spurs an FX reaction. It may limit USDCAD gains in the short term.
Wall Street opened in positive territory and added to the gains. Conventional wisdom suggested that the Democrat win would be bad for stocks as they could try to roll back tax cuts. For the moment, traders don’t see that as an issue, preferring to believe that a gridlocked Congress is good for equities.
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