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FOREX: USD Index Consolidates Opening Gap Lower as Presidential Election Looms

FOREX
  • US election odds narrowed this weekend, leaving the outcome of this week’s vote even more on a knife edge. With US 10 year yields roughly 10bps lower on the session, the USD index has held on to the majority of it’s opening gap lower, down around 0.4% as we approach the APAC crossover.
  • This has created some notable gaps for the majors, most pronounced for the likes of USDJPY (-0.67%) and USDCHF (-0.78%), owing to their sensitivity to adjustments in core yields.
  • USDJPY sits exactly 100 pips lower from last Friday’s close at 152.00, although the pullback appears technically corrective at this juncture with the trend condition remaining bullish. Firm support remains much further down at 148.99, the 50-day EMA, with initial support residing at 150.73 (20-day EMA).
  • Slightly more moderate moves in EURUSD, although the pair did once again flirt above the 1.0900 handle for a lot of the session. Price hovers just above 1.0880, the 20-day EMA and a clear break of it would signal scope for a stronger recovery, towards the 50-day EMA at 1.0940 and the early October highs around the 1.10 mark.
  • There were also some punchy range in EM, including notable recoveries for the likes of MXN and BRL following their very weak closes on Friday. USDMXN dipped as much as 1.68% to 19.96 before recovering to 20.10 in late trade, perhaps providing early signs of the likely volatility for the pair that has been such a feature of the past two US elections.
  • Tuesday’s calendar highlights will be the RBA decision and US ISM Services PMI, however, market moves are likely to be contained as participants look ahead to not only the particularly consequential US election results, but the Fed and BoE decisions also later this week. 
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