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Daily Technical Insights 9 November 2022


EURUSD (4-Hour Chart)

The EURUSD managed to climb back to the level above the 1.0000 threshold as the US dollar fell below the 110 level, which is the first time in the last two weeks, during the US trading session. The outcome of the US mid-term elections could have long-lasting effects on the American dollar, particularly if Democrats are not able to retain control of both houses. Republicans do not need much to seize control of Congress. If that’s the case, they may oppose President Joe Biden’s massive expenses, which would exacerbate the risk of an economic downturn. Equities will likely collapse, but it does not seem the dollar could benefit much from it.

In Eurozone, France’s trade deficit widened to € 17.49B in September and Retail Sales in Italy expanded 0.5% MoM in the same month. Meanwhile, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair.

From the technical perspective, the four-hour scale RSI indicator continued to advance to around 68 figured closed to 70, overbuy zone, which suggests that the pair was amid strong bullish momentum. As for the Bollinger Bands, the European currency remained firmly above the 20-period moving average, which is a signal that the pair was surrounded by an upside tendency.

Resistance:  1.0000, 1.0094

Support: 0.9813, 0.9730, 0.9636

GBPUSD (4-Hour Chart)

The GBPUSD successfully rebounded to a level above 1.5500 as the US dollar struggles to find demand as a haven on Tuesday as risk flows continue to dominate the financial markets, providing a boost to the pair. The pounds were priced at 1.1576 level as of writing. The greenback has dropped across the board in the US trading session, and US stocks advance with all eyes on the outcome of the US mid-term elections. 

A hitherto rangebound market has led to a significative US dollar pullback as the first surveys started hinting at a Republican victory. The scenario might create a gridlock in the US Congress that would be welcomed by the market as it will hinder the approval of new regulations.  Nevertheless, it’s worth noting that the outcome of the US midterm election is likely to be unveiled later in the week, opening the door for choppy market action in the short term.

From the technical perspective, the four-hour scale RSI indicator edged lower to 58 figures as of writing, suggesting that the pair’s positive traction slowdown. As for the Bollinger Bands, the pair kept pricing above the 20-period moving average but was capped by the upper band two times in a row, signalling that the upside momentum is softer. Hence, unless there is a surprising CPI figure, the pound was more favoured to the downside path in the near term.

Resistance: 1.1645, 1.1732, 1.1878

Support: 1.1439, 1.1159, 1.0955

XAUUSD (4-Hour Chart)

Gold surged to above the $1710 mark and aimed for October’s monthly high of $1729.87, with XAUUSD pricing at $1715 marks as of writing. The midterm elections in the United States increased risk appetite and triggered a sharp decline in US Treasury yields during US trading hours, which, in turn, caused a USD sell-off. The US Dollar index (DXY) tumbled by 0.72% for the day and fell to below 109.5 level, which is the first time since 27th October.

Investors are likely to refrain from betting on an extended risk rally while awaiting the outcome of the United States (US) midterm elections. If Republicans take the majority in the House and the Senate, additional gains in the US stocks could be witnessed. However, a split Congress could force market participants to adopt a cautious stance amid heightened uncertainty surrounding the fiscal policy. Meanwhile, the expectations for the Federal Reserve’s December meeting remain tilted towards hiking 50 bps, as shown by the CME FedWatch Tool at 52%. The speculations for a 75 bps increase are 48%, unchanged from a day ago.

From the technical perspective, the four-hour scale RSI indicator surged to 74 figures as of writing, which has entered into the overbought zone, suggesting that some selling transactions could be expected. As for the Bollinger Bands, the gold was priced around the upper band and the size of the upper and lower bands became larger, signalling the yellow metal was still surrounded by strong positive traction. Therefore, we think the price would wander around the $1710 area to consume some selling pressure and then move up to challenge the $1725 mark in the near term.

Resistance: 1725, 1745

Support: 1665, 1641, 1615