EURO FALLS AS WORRIES OVER ITALY CONTINUE

Financial markets were mixed today as investors waited for the results of the US mid-term results. These results are highly anticipated in markets around the world because they will determine the progress in Washington. A win by the Republicans in both houses will mean more progress for the Trump agenda. A flip by the Democrats on the Senate and the house will mean more deadlock in Washington. It will also mean a reversal on some of the progress made by the Trump administration. For example, Democrats have campaigned on the need to reverse the tax package passed by the current government.

The Australian dollar rose today after the RBA released its interest rates decision. As expected, the bank left the interest rates unchanged. In the statement, they increased the economic growth forecast for 2018 and 2019 to 3.5% up from the previous forecast of 3.25%. They also signaled that the unemployment rate will likely drop to 4.7% by March 2019. If this happens, this will be the lowest it has been in more than 10 years.

The euro fell today as investors continued to worry about Italy. Today, Italian bonds continued the sell-off after the services industry went into contraction. Data showed the Italian services PMI fell to 49.2, which was lower than the 52.21 that traders were expecting. It was also lower than the PMI of September which was at 53.3. PMI data rising above 50 shows that the sector is improving. When it is below 50 and decreasing, it is an indicator that activity in the sector is shrinking. The French services PMI of 55.3 was lower than the expected 55.6. On a positive side, the services PMI for Germany rose to 54.7, which was higher than the consensus estimate of 53.6. The composite PMI rose to 53.4, which was better than the expected 52.7.

The sterling continued the upward momentum, rising to the highest level in two weeks. The upward trend was mostly because of the optimism of a Brexit deal. The currency reached a high of 1.3085 against the USD. This was about 3 percent higher than where it ended the month at. These gains could accelerate in the coming few weeks as traders wait for a deal to be announced. Last week, the Brexit minister raised optimism when he said that a deal was about to be made. However, the pair’s trend could be affected by the results from the US mid-terms and the decision by the Fed this week.

GBP/USD

The GB/USD pair reached an intraday high of 1.3085, which was the highest level in two weeks. It is now trading at the 1.3070 level, which is along the 61.8% Fibonacci Retracement level. It is also nearing the upper band of the Bollinger Bands. The RSI is at the 70 level while the MACD indicator is at the highest level in months on the six-hour chart below. Therefore, while the pair could continue moving up, there is a likelihood that it will retrace to the 50% Fibonacci Retracement level of 1.2990.

EUR/USD

The EUR/USD pair was little moved today ahead of the US mid-term elections. As of writing, the pair is trading at the 1.1410 level, which is slightly lower than yesterday’s high. As a result, the pair’s double EMAs are along the current market price. This price is above the important diagonal resistance level shown below and is along the 38.2% Fibonacci Retracement line. Therefore, traders should wait and see because the pair could breakout in either direction.

AUD/USD

The Australian dollar rose today after the RBA released its monetary policy statement. It is now trading at 0.7230, which is slightly lower than yesterday’s high of 0.7260. The ADX index indicator is at 42 and rising which is an indication that the pair could continue moving higher. If it does, the pair will likely move past the previous high of 0.7260 and move to test the important 0.7300 level.