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Risk-Off After US Political Uncertainty

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  • Investigations into Trumps election and charges against Paul Manafort (Trump’s ex campaign manager) created a risk-off situation on the market yesterday.
  • The initial tax reform bill is due out on Wednesday and Trump is likely to announce the next Fed Chair on Thursday. Add to this FOMC decision and NFP, the USD is likely to have a volatile week.
  • We believe that as a whole, the dollar could be weighed down. Corporate tax rate may be prolonged rather than immediate as most people anticipated. A cautions figure is also the most likely candidate for Fed Chair in Powell.
  • USD/JPY fell through two support lines on Monday (now turned resistance). This happened after the pair tested the long-term 114.30 (R3). We believe the bears will keep control of the pair and after the pair droped below the 113.25 (R1) it may be heading towards the 112.25 (S1).
  • Gold’s price action and short-term oscillators have showed positive divergence suggesting a potential temporary up-trend. We don’t see Gold breaking the long-term sideways trend however we see the potential break of 1283 (R1) and a further test at 1290 (R2).

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BoJ inflation forecast trimmed

  • BoJ trimmed its inflation forecast but kept everything else more or less unchanged revising only its GDP growth projection. Most central banks are on the way to raise interest rates and this could prove negative for the JPY. Also another key factor is the markets willingness to risk.


Highlights of the day:

  • Eurozone’s October CPI prints. Headline and core rates are forecasted to have to have ticked down which may weigh negatively negatively on the EUR. GDP for Q3 also come out as well as September’s unemployment rate. However inflation data is likely to be what investors concentrate on the most.
  • Tire-two indicators are out in the US today as well as Q3 index costs. Chicago October PMI & CB consumer index are also due. And in Canada, Augusts GDP data comes out.
  • BoC Governor Stephen Poloz is the only speaker today. A cautious tone could weigh down CAD

 

USD/JPY

  • Support: 112.25 (S1), 111.70 (S2), 111.10 (S3)
  • Resistance: 113.25 (R1), 113.60 (R2), 114.30 (R3)

 

Gold

XAUUSD_31Oct2017

  • Support: 1274 (S1), 1267 (S2), 1260 (S3)
  • Resistance: 1283 (R1), 1290 (R2), 1300 (R3)

 

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.


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