Weekly technical outlook: USD/JPY, EUR/USD, GBP/USD [Video]

2024 US election: USD/JPY 

November 5 will be a sleepless day in the US as voters will finally head to the polls to elect the next president. The battle between the Republican Donald Trump and the Democrat Vice-President Kamala Harris has been hanging in the balance, and any outcome is possible, despite Harris running narrowly overhead at the moment. The race is deadlocked in six of seven swing states, but the results in Michigan, Arizona and Pennsylvania could shift the dynamics.

Regardless of who will be the winner, the next administration is expected to face a daunting geopolitical and economic environment in the years ahead as wars in the Middle East and Ukraine remain unresolved, while the global industrial competition with China intensifies.

For the time being, traders have linked a Trump victory with tax cuts and import tariffs, which could ignite inflation and exacerbate the already heavy debt levels, consequently fueling more demand for the US dollar.

In FX markets, USDJPY has shown resilience in the wake of Friday’s puzzling jobs report. It maintains a short-term uptrend above its 20-day exponential moving average and the critical 150 mark. However, for a robust rally towards the 157.00 target, a decisive close above the 153.40 region is essential. Conversely, a drop below the long-term EMAs around 149.60 could trigger the next bearish turn.

Fed policy meeting: EUR/USD 

All eyes will be on the Federal Reserve’s policy announcement this Thursday, especially since the counting of election votes could stretch into days or even weeks before a clear winner is declared. October’s nonfarm payrolls report revealed a stagnant job creation figure, along with a downward revision of September's numbers. Analysts, however, attributed these setbacks to the impacts of hurricanes and strikes in the aerospace sector, which consequently kept the odds for a single 25 bps rate cut close to certainty.

As traders tune into the Fed’s communications, they’ll be curious to see if the presidential election results influence the central bank's rate guidance, especially as futures markets foresee another reduction in December. Ambiguity about the path of rate cuts could provide a helping hand to the US dollar, pressing EURUSD back below its 200-day simple moving average at 1.0870, though a more critical support territory could come near the one-year-old ascending trendline at 1.0780.

On the flip side, if the euro manages to break above the 1.0900 level, it could signal further gains potentially towards 1.0940 and then up to the 1.0980-1.1000 range. 

BoE policy meeting: GBP/USD

The Bank of England (BoE) is anticipated to announce a 25bps rate cut on Thursday, just ahead of the Federal Reserve, following a decision to maintain borrowing costs in September. The recent and unexpected slowdown in inflation may prompt policymakers to implement their second rate cut since June. However, the future trajectory of rate cuts remains uncertain, making it crucial for traders to closely analyze the central bank’s language and voting structure for further insights.

Last week, GBPUSD struggled to close above the 20-day simple moving average and the key psychological level of 1.3000, retreating instead to a two-month low of 1.2842. If the BoE hints at more rate cuts to come, the bears may again attempt to reach the 200-day SMA around 1.2800. A decisive break below this level could add more credence to the short-term downward pattern.

Conversely, if the BoE adopts a cautious, meeting-to-meeting approach with little guidance on future policy, GBPUSD could break through the 1.3000 barrier with scope to meet the 1.3100 level and the 50-day SMA.