Pre-Market Analysis And Chartbook: Dollar Slips Again as Midterms Provide No Surprises

Wednesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,781 0.83%
DAX 30 11,547 0.55%
WTI Crude Oil 62.55 1.31%
GOLD 1,229 0.06%
Bitcoin 6,498 0.79%
EUR/USD 1.1480 0.48%

Risk assets are up so far today after a busy Asian session, with the Dollar extending yesterday’s losses. The outcome of the US midterms was exactly in line with expectations, since the GOP kept the Senate while the Democrats took control of the House of Representatives. While there was a bit of uncertainty with regards to the House majority early on election night, as the results started to come in, it became clear that the forecasts were largely correct this time around.

EUR/USD, 4-Hour Chart Analysis

The most-traded forex pair had a volatile overnight session due to the elections, and the Euro rose to a more than 2-week high in Asian before turning lower off the strong resistance zone near 1.15. Although short-term Treasury yields climbed to a new cycle high, the Dollar got slight weaker because of the gridlock outcome, but on the long run we expect only a mildly bearish effect on the Greenback, and the long-term uptrend of the reserve currency could continue.

 The negative surprise in Eurozone Retail Sales also contributed to the pullback in the pair in European trading, with the slowdown in Italy, in particular, getting more and more pronounced.

S&P 500 Futures, 4-Hour Chart Analysis

Equities celebrated the “no-surprise” scenario, with especially the US indices gaining ground amid the pre-market plunge in the Volatility Index (VIX). The Dow is still leading the way higher but even the SP 500 is relatively strong compared to the lagging Nasdaq.

On a negative note for risk assets, the weakest “links” in global markets are starting to underperform from a technical perspective again, Europe in particular, and that could already signal that the oversold rally is running out of steam. US small-caps, on the other hand, opened higher today, so the immediate outlook is not clearly bearish, but given the long-term setups, caution is already warranted.

Cable Nears 1.32, as Rally in Copper Fades

GBP/USD, 4-Hour Chart Analysis

The Pound also gained ground compared to the Dollar for the third time in a row, helped by the slight beat in the Halifax housing price index, and the GBP/USD pair got close to the 1.32 level after forming a higher high yesterday.

In the US mortgage applications fell to a multi-decade low amid rising yields, and that continues to cast a shadow on the housing market. The market has already been showing signs of distress this year and the outlook for 2019 continues to get gloomier as rates continue to push higher.

Copper Futures, 4-Hour Chart Analysis

Commodities are having a volatile but flat day so far, as although gold, copper, and crude oil are all slightly higher on the day, they are all well below their intraday highs, with especially copper’s weakness being a worrying sing for risk assets.

Thanks to the US-Chinese trade deal rumors, the industrial metal avoided a technical breakdown last week, getting back to the upper boundary of its broad consolidation pattern, but the momentum of the move faded this week. Today, Chinese stocks and cooper lagged risk assets hand in hand, and a move below $2.7 in the coming days could signal a resumption of the downtrend and a likely test of the lows near $2.56.

ChartBook

Major Stock Indices

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

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Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.