Obama Victory Hope Leads To USD Weakness

Markets are in for some volatile trading over the next 24 hours with US elections wrapping up and Obama looking set to secure a second term. The immediate response to the Obama victory projection was a sharp move higher in Gold and in the EUR/USD. US Stocks however fell sharply and this could support the dollar later on safe haven demand. Looking ahead, official US elections results expected.

The Euro (EUR)
The EUR/USD was under pressure before the US elections began with Greece remaining unresolved and the date of action pushed back until late November. If Greece votes not to accept the latest round of labor reforms and not receive bailout aid then it will likely default and leave the EU at least temporarily. EUR/USD has been well supported since the US elections started with more Obama leading to more Fed easing they believe.

The Sterling (GBP)
GBP/USD has been extremely volatile with sellers pushing the major below 1.6000 but we have surged back above the round figure in Asia today as the dollar is sold across the board. GBP/USD will follow the EUR/USD while the EUR/GBP is locked at 0.8000. Looking ahead, German Industrial Orders forecast at -0.5% m/m.

The Japanese Yen (JPY)
The USD/JPY enjoyed gains back above Y80 during the US session but we have seen heavy selling come through on the pair since Obama was projected to win. EUR/JPY was even more volatile falling sharply from Y103 to Y102.30 and then back to Y103 in the Asian session so far. New Japanese FinMin Jojima entered the jawboning façade stating that intervention is possible to counter one sided FX moves.

Australian Dollar (AUD)
The RBA held at 3.25% in a shock to the market where most economists had forecasted a 0.25% rate cut. The RBA statement gave reasons for them holding including a soft landing for China and higher than forecast inflation. Looking ahead, October Unemployment Change forecast at 14.5k. October Australian Unemployment Rate forecast at 5.5% vs. 5.4% previously.

Oil and Gold (XAU)
Gold and Oil were perhaps the biggest movers in the market overnight both up substantially on Obama victory speculation and the weak USD. OIL/USD surged nearly $3 higher above Y88 before profit taking capped in Asia so far. Gold is looking to retest $1733 after soaring back to life overnight.

Pairs To Watch
USD/JPY: Can the Y80 level hold?

XAU/USD: Uptrend to resume if Obama wins?

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