EUR/usd
This week is fraught with risks of uncertainty. And it is not all about the elections in America. We shouldn't forget about China. According to the surveys now Obama is in the lead, but his advantage makes only about 0.7%. Thus, the election results are even more unpredictable than Friday's employment statistics. Let's focus on the possible reaction of the markets in each of the two potential outcomes of the elections. In our opinion, Romney's victory will be in favour of the dollar, but will increase the pressure on the stock exchanges. Obama's reelection will tell favourably on the stock indices. In this case they will benefit from the lower risk of uncertainty and preservation of the current policy since the participants already know the managerial style of the president. Besides, earlier surveys have reported that the business outside the USA regards Obama's reelection as a bigger benefit for the global economy. In short, high uncertainty connected with the election of a new president may lead to capital flow into the safety. Moreover, Romney's pledges presuppose a greater struggle with the budget deficit, so the number of the issued treasury bonds will be much reduced then. And this may cause thirst for the dollars. Still this is just an attempt to predict the long-term trends, the risk to make an error here is very high since we know nothing about Romney's external policy. If he proves to be as bellicose as Bush, it may spill over into the growth of commodity prices, telling adversely on the dollar. Another elections, closed ones, have taken place in China. We know little about the results now. The local newspaper reports that the power is now in the hands of the conservatives. We'll learn the details on Thursday, when the new ruling top will be introduced. Some observers already worry that the conservatives' advent to power can make China a closed-off country, which can cause the capital outflow and put a heavy pressure on the economic growth rate. To be honest, we don't want to believe that the government of such a big country doesn't realize the importance of outward investments, especially when the leaders of the developing countries are actively inviting business investments, which wasn't observed in 2000s.
EUR/GBP
The States is not the only source of news now. For Europe there are also many important data, however for the most part they tell badly on the euro. Yesterday's Spanish statistics proved to be poorer than expected by the market. The two-day strike has started today in Greece. All this has caused selling of the euro, which has dropped both against USD and GBP. The euro/pound slipped below 0.80 at night – this is a five-week low. Technically, the fact that the pair has gone out of the upward corridor is disturbing, so the further decline is quite possible.
USD/JPY
The Japanese yen reversed at 80.65 against the dollar. The pair failed to seize the high of late June at the first try. The strong resistance in the pair provoked a wave of the yen purchases, even against the general demand for the dollar and rather positive mood of the stock exchanges. Quite likely, the pair will try to test the 200-day MA, which is passing through 79.50.
oil
It's a funny thing, but the favourable data on the US employment and encouraging forecasts of retailers by the end of the year have failed to grow into the strengthening at the Oil market. WTI dropped below 85 yesterday, this is the low since mid July. brent feels a bit better in the morning and has hit $108. Yet all the above-mentioned risks still persist.
