As we noted more than a month ago, the Mexican peso has become the forex market's de facto measure of "Trump" risk. Traders see Republican Presidential candidate Donald Trump as relatively hostile to Mexico, given his promise to build a wall along the U.S.-Mexican border, and his harsh opposition to the North American Free Trade Agreement.
The Australian dollar and the Japanese yen are the obvious choices when it comes down to trading during the Asian session tonight. Not only do we have rate decisions from central banks of both Australia and Japan, but we will also have the latest manufacturing PMI data from China, the world’s second largest economy and Australia’s largest trading partner.
New orders for U.S. manufactured capital goods unexpectedly fell in September amid weak demand for computers and electronic products, which could temper expectations for an acceleration in business spending in the fourth quarter.
An air of caution filtered throughout the equity markets on Tuesday with the FTSE 100 being the only real mover as the index continued its run above 7000. While strong performing mining stocks were seen as the catalyst driving the FTSE 100 higher.
Currency markets were unnaturally calm during trading on Tuesday with major currency pairs lacking direction as anxious traders awaited the next big macro release. Stock markets meandered between losses and gains as the conflicting combination of rising oil prices and heightened expectations of a U.S. interest rate kept investors on edge.
The Australian dollar has been fairly stable recently, and it has actually risen against weaker rivals such as the New Zealand dollar and Japanese yen. However, that could all change if investors start to dislike risk, if, for example, U.S. elections or disappointing corporate earnings cause global equities to retreat.
Looking at the Euro/U.S. Dollar currency pair we see price trapped in a big consolidation pattern, a triangle that seems to be over as of recent bearish price movement. It's a five-wave correction, a continuation pattern that can after its completion push price lower into a strong decline.
It has been a very good week for the U.S. dollar and a really bad one for the euro and Canadian dollar, among others. The rally has lifted the Dollar Index to its highest level since early February and possibly on course to 100.
Stock markets were erratic on Thursday with most major arenas violently swinging between losses and gains as the messy combination of depressed oil prices, a resurgent U.S. Dollar and rising European Central Bank stimulus hopes kept investors on edge.