The US midterm elections were held yesterday and the Democrat Party won the Congress as expected. There were more than 30 Republican seats to be voted for and Democrats needed to win just a few to take control of the Congress, which they did. Although, the Republicans extended their Senate seats, so these elections were somewhere in the middle of the road, just like the general elections two years ago. It could mean some trouble for the White House administration to pass budget, tax cuts or immigration laws, but overall, the situation will remain pretty much the same as it is now.

In trade terms, things are poised to remain as they are and the clash with China is expected to continue. The FED will keep the same path regarding the monetary policy, so the picture is little changed for the USD. We might see some more weakness after the initial decline after the market got to terms that Democrats had taken the Congress, but the volatility has diminished and the USD is now pushing back up. The market was building up for a big shock, but we didn’t see a blue (democrat) wave sweeping up as Democrats were hoping for, so the market is realizing now that especially the economic policies will remain pretty much the same and stock markets are climbing, while Gold and the JPY are declining. This means that the sentiment is turning positive now, so that was it for US elections.

The European Session

• UK Halifax House Price Index – House prices were expected to increase by 0.8% in October in the UK, but they increased by 0.7%. That is pretty close do it is a positive reading. Last month was revised a bit higher as well to -1.3% from -1.4%.
• German Industrial Production MoM – Industrial production was expected to remain unchanged in Germany but it increased by 0.2%. Last month’s number was also revised higher from -0.3% to 0.1%.
• Ireland Wiling to review the Close in the Brexit Backstop – Irish PM Vadarkar said that they are willing to review the backstop clause, but says that he wants to guarantee of no hard border. Positive words for the GBP.
• Russia and Saudis Talk on Oil Production Cuts – The Russian news Agency TASS reported that the Russians and Saudi Arabia will start discussing cutting Oil output. Oil jumped more than $1 on that news.
• Eurozone Retail Sales – Eurozone retail sales were expected to increase by 0.1% but remained flat. Although, last month’s number was revised higher to 0.3% from -0.2%, so it was a bit of a mixed report.
• Italian Government Wins Confidence Vote – The governing Legga Nord Party in Italy pushed for a bill that makes it easier to deport immigrants with a crime record and some other security law, but some of the other governing Party legislators didn’t agree with Salvini, so the government had a no confidence vote today. They survived it, so now let’s see how they will go on with the budget plans for next year.

The US Session

• EU Need Breakthrough by Early Next Week for A November Brexit Summit – Reuters cited an unnamed EU official saying that we ned a breakthrough pretty soon in order to hold a Brexit summit at the EU in November. The update on Brexit has been postponed to Friday as the EU waits the proposal from the UK, so it seems like there is no consensus yet.
• Merkel’s Ally Resigns from the Post of the CSU Leader – Merkel declared last week that she wasn’t going to run for the post of the leader of the CDU Party. Now we hear that the coalition partner CSU’s leader has offered to step down from his position. Major changes all over Europe.
• Trump Is Playing His Cards Again – US President Trump just tweeted that if the Democrats want to waste taxpayers money on Congressional investigations, then Conservatives will investigate Democrats at the Senate. It takes two to tango.
• Canadian Ivey PMI – Canadian Ivey PMI indicator which shows the shape of business conditions is expected to come at 50.9 points, up from 50.4 points previously. It has declined constantly over the last several months, so don’t be surprised to see another disappointment today.

Trades in Sight

Bullish GBP/USD

1. This pair is on a bullish run
2. The 50 SMA is catching up
3. The retrace will be complete when stochastic is overbought

The 50 SMA is catching up

GBP/USD reversed the bearish trend last week and has entered a bullish period, climbing nearly 500 pips during this period. It is slightly retracing now after the surge on US election results, but the retrace is much smaller than in other pairs, so the buying pressure is still on. We are thinking of buying this pair when the price reaches the 50 SMA (yellow). By that time, stochastic will be oversold which means that the retrace will be complete.

In Conclusion

OK, so the US midterm elections are now over and the reaction in financial markets seems to be over as well. Not that there was much action, I was expecting some bigger shock moves but that was it. Now the market attention will shift to Brexit and the international trade disputes. It just gets a bit easier for forex traders.