As expected, the Democrats have returned the House of Representatives from the hands of the Republicans, but in the Senate, the latter has an advantage. Although not all of the votes are counted, it is already known that the Democrats received at least 23 seats in the House of Representatives, taking over the majority in the lower house of the Congress. The result that is consistent with the expectations keeps the markets calm while colliding the positive effect of removing the risk factor with concerns that the divided Congress will not stop the economic policy of Trump's administration.
The USD notes swinging trade but ultimately does not lose much to major currencies. EUR / USD jumped to 1.1395 to 1.1470 - now it is 1.1435. USD / JPY for a moment was at 113.80, but returned to 113.20. GBP / USD moves within the range of 1.3100-1.35050.
The stock market in Asia gave back earlier profits in trade with limited volatility. Japanese Nikkei225 loses 0.3% and Chinese Shanghai Composite falls 0.6%.SP500 contracts are growing by 0.1%.
Crude oil remains weak after Tuesday's drop by 2.0% and today adds another 0.6% up to the level of 61.8 USD. The API report pointed to a sharp increase in crude oil inventories by 7.8 million barrels. Today, before the official DoE data, the consensus assumes an increase in inventories by only 1.6m bbl.
On Wednesday, the 5th of November, the event calendar is light in important data releases until the very end of the trading day when the Reserve Bank of New Zealand will make interest rate decision. Nevertheless, it is worth to keep an eye on German Industrial Production data, Eurozone Retail Sales data, Canadian Ivey Purchasing Managers Index and Crude Oil Inventories from the US.
NZD/USD analysis for 07/11/2018:
The RBNZ will make the decision regarding the interest rates. The market participants expect the Official Rate so be left unchanged at the level of 1.75%. The Official Cash Rate (OCR) is the interest rate set by the Reserve Bank to meet the inflation target specified in the Policy Targets Agreement (PTA). The current PTA, signed in September 2012, defines price stability as annual increases in the Consumers Price Index (CPI) of between 1 and 3.0% on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint Interest rates are a primary determinant of a currency's value and these statements are used by traders to determine future monetary policy decisions. The Reserve Bank of New Zealand will release the Monetary Policy Statement in connection to its recent decision on short-term interest rates.
Moreover, the labor market report for the third quarter was surprised the market participants in a positive way. Employment increased by 1.1% (0.5% threshold), which allowed the unemployment rate to decline to 3.9%. (4.4% progressions). It still yesterday allowed NZD to jump up, and today the NZD / USD improved the high at 0.6777 with a slight recession before the start of trade in Europe.
Let's now take a look at the NZD/USD technical picture at the H4 time frame after the labor data were published and RBNZ decision is yet to be made. The market has broken through the technical resistance at the level of 0.6724 and is currently trading around the level of 0.6750, just below the local high at the level of 0.6775. The momenrum is still strong and positive, but the market conditions are now overbought, so a temporary pullback towards the support is needed.
