USD Slides on Split Congress, RBNZ Decides on Policy

Democrats Gain the House, Republicans Keep the Senate

The dollar traded lower against all but two of the other G10 currencies. It traded virtually unchanged only versus CAD and JPY. The main winner, and by a large margin, was NZD, which rallied overnight after New Zealand’s better-than-expected employment data (see below). GBP took the second place, staying supported by Brexit optimism. On his way out of yesterday’s cabinet meeting, Brexit Secretary Dominic Raab gave reporters a “thumbs up”, boosting further expectations of a Brexit deal breakthrough.

EUR/USD — Technical Outlook

Overall, EUR/USD continues to trade below the medium-term downside resistance line drawn from the high of the 17thof April. That said, on the shorter-term picture, we can see that the pair has formed a falling wedge, from which it managed to break out of during the Asian morning today. Even though we can see that pair is now retracing back down slightly, this could still be seen as a setback, after which EUR/USD could resume the move higher. From the short-term perspective, we will aim towards higher levels, last seen in mid-October.

RBNZ Decides on Monetary Policy

The Kiwi jumped overnight, following New Zealand’s stellar employment data for Q3. Digging into the details, the unemployment rate unexpectedly dropped to 3.9% from 4.5%, which is the lowest since Q2 2008, while the employment growth accelerated to +1.1% qoq from +0.5%. Wages slowed on an annual basis, to +1.9% yoy from +2.1%, but this was in line with expectations.

GBP/NZD — Technical Outlook

The New Zealand dollar has picked up the pace against all of its major counterparts during the early Asian morning, and the British pound was no exception. GBP/NZD continues to travel south since its reversal on the 10thof October. Even though last week, it looked like the pair was trying to push back up again, still, it failed to deliver a good result. This Monday and Tuesday, we saw the upside momentum slowing down and eventually GBP/NZD sold off heavily overnight after New Zealand delivered a much better than expected employment figures. There is a good chance to see a follow-through effect here, where the pair could continue moving lower.

As for the Rest of Today’s Events

During the European morning, Eurozone’s retail sales for September are expected to have rebounded 0.1% mom after sliding 0.2% in August. This is likely to bring the yoy rate down to +0.8% from +1.8%. Germany’s industrial production is also due to be released.



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