Four USD charts for Obama’s four more years

A look at where we stand on four of the major USD charts after the initial knee-jerk USD selling on the news of an Obama victory.

As the market feels that Fed policy is the be-all and end-all for the US dollar and as a liquidity driver for risk appetite in global markets, the initial news of an Obama victory is being greeted largely as expected, with a fresh round of USD selling that actually got started before the result was known (EURUSD is a bit of a special case because of negative Euro developments, but look at the commodity currencies vs. the USD).

But now two questions beg:
1) How much of an Obama victory has already been baked into the cake and can this continue?
2) At what point, if any, does the market start to pivot toward worry and possible risk aversion (potential USD upside) due to the impending fiscal cliff?

The answer is certainly unknown for now, but we can establish a few levels on the charts that might help sway the technical view either way. It would seem that the USD weakening move will run out of steam at some point soon - but is soon in four hours or four days or 3 weeks? I would suspect that the move is fairly quickly capped – at least until the market sniffs out a congressional/Obama deal should any prove forthcoming, and one wonders if the odds of that are particularly high given the political spectacle we’ve seen in the recent past on these kinds of negotiations. This time the stakes are higher, because the maximum cost is ironically arrived at if nothing is accomplished.

Chart: EURUSD
The first order of business is EURUSD, where the recent sell-off took us just beyond the edge of the range and where we are now seeing attempts at a reversal to keep the pair contained within the range. Trading should remain nervous here until the other side of this Thursday’s ECB meeting, which will give an overall impression of Euro sentiment. If the pair can work and stay above the 1.2885 to 1.2900 area, this underlines the support for trading within the old range and suggests a probe of the high side of the range and beyond in the weeks ahead if 1.3000 can be taken out after Thursday. The downside advocates need a reversal more or less today or tomorrow to keep the near-term downside view intact, with a close below 1.2800 as confirmation that the recent sell-off waves are indicating a move out of the old 1.2800-1.3170 range.

Chart: USDJPY
USDJPY is an interesting one as the overnight attempt below 80.00 appears so far to merely have been a go at weak stops. That 80 level is certainly a psychological key, though the 200-day (40-week) moving average a bit lower and the 79.00 area are also important. I am showing the weekly here because of the importance of the Ichimoku cloud levels for this chart, with a close below the cloud a disappointment for bulls and a close higher of break-out significance. Stay tuned – that cloud narrows quickly in the weeks ahead.

Chart: AUDUSD
AUDUSD has torn free of near term resistance above 1.0410, but the pair is still within the long standing range that stretches all the way back to July. Still, there is plenty of room to maneuver up to the key 1.0600 area (not the long standing trendline has descended below that level, while the flat-line resistance is just above 1.0600. Above 1.0600 would probably require a new deal on the fiscal cliff and new highs for the cycle in equities or a wild rally in commodities. Bears need a quick reversal back below 1.0400 to see any sign that this knee-jerk reaction is a red herring.

Chart: GBPUSD
A messy chart here – it’s about 1.6000/1.5950 as a pivot area to the downside and 1.6150/1.6200 to the upside. Note the 200-day moving average creeping higher if a sell-off begins to take hold – this was a key resistance area on the way up.