Risk came back in style in the forex market today as the stars aligned to boost currencies versus the dollar and yen on Election day. Firm equities, a jump in commodities and a slide in US bond yields all worked to support EUR/JPY, the legs of the cross and the commodities currencies as well. Australia’s move to aggressively cut another 75 bp off official yields helped spur the rally as dealers hoped for similar moves from the BOE and ECB later this week.
EUR/JPY reached 131.00 resistance before stalling while EUR/USD came close to downtrend resistance at 1.3050.
Overnight, look for a 60 member majority in the Senate for the Democrats to be the one event risk that could derail the equity rally in the US and ultimately the EUR/JPY rally. Also beware the “buy the rumor/sell the news” phenomenon if Obama goes over the top early in the evening.
