Forex Forecast: Pairs In Focus - Sunday, Oct. 18

The difference between success and failure in Forex trading is very likely to depend mostly upon which currency pairs you choose to trade each week and in which direction, and not on the exact trading methods you might use to determine trade entries and exits. The current market environment remains one of contradiction, with a questionable rebound as global stock market indices recovered to reach new all-time highs before correcting, despite the continuing spread of the coronavirus pandemic which is still sweeping the world.

Big Picture October 18

In my previous piece last week, I saw the most attractive trade opportunities as likely to be in short-term short trades in the USD/JPY currency pair and short-term long trades in the S&P 500 Index. This was an indifferent call as the USD/JPY currency pair ended the week down by 0.21% and the S&P 500 Index ended the week down by 0.48%.

Last week’s Forex market saw the strongest rise in the relative value of the Japanese Yen and the strongest fall in the relative value of the Australian Dollar.

Fundamental Analysis & Market Sentiment

The focus now of stock market analysts in the U.S. is centered mostly upon the issue of progress towards a deal between House Democrats and the Trump administration on a further round of economic stimulus which is widely seen as necessary to reignite economic recovery from the coronavirus shock earlier in the year. It seems clear that there will be no such agreement before the election, but opinion polls are suggesting that a Democrat clean sweep of the Presidency and both Houses of Congress is becoming increasingly likely, which would probably result in a generous and fast stimulus package being agreed rapidly, and this is holding markets up despite the general shakiness of risk sentiment.

Markets appear to be largely unconcerned with the result of the U.S. Presidential election, having already priced in a likely Biden victory which is forecast by all major opinion pollsters. Nationwide polls are showing Biden ahead by almost 10%, while in the key states he is ahead by about 6%. Some analysts take a contrarian view that the polls severely underestimate the President’s support. Betting markets are increasingly predicting a more comfortable Biden victory with a probability of about 66%, and markets seem quite comfortable with that.

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