There are a couple of potentially market-moving economic reports on tap, but traders will likely keep their focus on the tighter-than-expected U.S. election results.
Will today’s themes lead to AUD/JPY extending its downtrend?
Before we talk setups, check out the headlines that dominated Asian session trading:
- China’s shock suspension of Ant IPO lauded as necessary by state media
- Australian construction activity turns corner outside of Victoria in October
- New Zealand unemployment rate rises as recession hits hiring
- Some in BOJ urged scrutiny on COVID-19 response – Sept meeting minutes
- Australia retail sales rise by record as economic growth resumes
- China’s service sector recovery strengthens in October, hiring picks up: Caixin PMI
- Global stocks led higher by tech, bonds rally on election nailbiter
- S&P 500 futures surge as Trump leads in battleground states
- Dollar climbs as risk of long wait in U.S. election outcome looms
- Australia, New Zealand dollars slip as Trump-Biden race too close to call
Upcoming Potential Catalysts on the Economic Calendar:
- Spain’s services PMI at 8:15 am GMT
- Italy’s services PMI at 8:45 am GMT
- Final services PMIs for France, Germany, Eurozone, and the U.K. on tap
- U.S. ADP report at 1:15 pm GMT
- Canada’s trade balance at 1:30 pm GMT
- U.S. ISM services PMI at 3:00 pm GMT
- U.S. election results under the spotlight
What to Watch: AUD/JPY
But reports schmorts. All eyes will likely continue to be on the U.S. Presidential elections, which did not yield a blue wave that markets had priced in the last few days.As of writing, the Democrats are set to retain control of the Lower House while both parties have flipped seats in the Senate. Biden is currently in the lead with 224 to Trump’s 213 but key swing states are more favorable to Trump than what polls had shown.
If the world needs to wait days before the U.S.’ next leader is decided, then the uncertainty could drag AUD/JPY deeper into its downtrend. As you can see, the pair bounced around the 75.00 major psychological handle near a descending channel resistance.
But if one of the key swing states puts one candidate firmly over the 270 mark, or if one candidate concedes in the next few trading sessions, then we could see some risk rally as traders have a better idea of which policies to price in.
In this case, AUD/JPY could pop above its descending channel resistance to hit the 78.00 previous inflection point.