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Copper bounced from $2.7235 low posted after strong two-day losses, when metal price fell over 3%.

Results of US midterm elections sent dollar lower across the board and boosted the metal price

Fresh recovery emerged above daily cloud (cloud top lays at $2.7557), retracing nearly 50% of $2.8215/$2.7235 bear-leg and improving technical outlook as the price moved above a cluster of daily MA’s and fresh bullish momentum is building.

Bulls look for renewed attack at bear-channel resistance line ($2.7734) which capped the action on Tuesday and was breached on Fri/Mon upticks to $2.8185/$2.8215 peaks.

Close above the bear-channel upper boundary would generate fresh bullish signal and add to growing positive outlook on today’s rally.

Failure to clear the bear-trendline would keep the price action within bear-channel and keep in play risk of fresh weakness.

Res: 2.7734, 2.7841, 2.8025, 2.8215
Sup: 2.7512, 2.7312, 2.7235, 2.7010

GBPAUD has steadied after dropping to an 8-week low of 1.7860 October 30. The pair rebounded to a one-week high of 1.8147 yesterday but is being capped by the long-term ascending trend line, which has been serving as both support and resistance ever since prices first dipped below it in August.

A break above this resistance shouldn’t be ruled out in the near term as the stochastic oscillator suggests the positive momentum hasn’t receded completely, with both the %K and %D lines continuing to rise. However, the %D line is fast approaching the %K line, so a bearish crossover is possible in the coming days. Also, the RSI is flatlining just below the 50 neutral level, indicating there is little momentum in either direction.

Even if the positive momentum was to strengthen, GBPAUD is likely to face strong resistance in the area around the ascending trend line as the 38.2% Fibonacci retracement level of the upleg from 1.7282 to 1.8724 also lies in this region at 1.8173. Should the pair manage to cross above this zone, the next hurdle could come at the 23.6% Fibonacci at 1.8384. A break above this level would clear the way for the 27-month high of 1.8724 reached in October and shift the medium-term picture to a more bullish one.

However, should prices fail to overcome this barrier, they could reverse lower again, with immediate support likely to come from the 50% Fibonacci at 1.8003. Not too far below lies the 200-day moving average at 1.7940. A fall below the 200-day MA would open the way for the 61.8% Fibonacci at 1.7833. A breach of the 61.8% Fibonacci would turn the focus back to the downside and to August’s 7-month low of 1.7282.

EUR/USD has posted considerable gains in the Wednesday session. Currently, the pair is trading at 1.1494, up 0.59% on the day. On the release front, German industrial production posted a gain of 0.2%, above the estimate of 0.0%. Eurozone retail sales improved to 0.0%, shy of the estimate of 0.1%. There are no major releases out of the United States. On Thursday, Germany releases trade balance and the eurozone publishes its economic forecasts. In the U.S, the Federal Reserve will release a rate statement. We’ll also get a look at unemployment claims.

It’s been a positive week for German manufacturing data. On Wednesday, industrial production ended a nasty streak of three straight declines, with a modest gain of 0.2%. A day earlier, factory production rebounded with a gain of 0.3%, beating the forecast of -0.4%. The eurozone economy slowed down in the third quarter to 1.7%, compared to 2.2% in the second quarter. If the economy is to rebound in Q4, Germany, the locomotive of the eurozone, will have to lead the way with stronger data.

Participation was high in the mid-term elections on Tuesday, and voters rendered a split-decision. The Democrats regained control of the House of Representatives for the first time since 2010, but the Republicans maintained control of the Senate, and have increased their majority. The results are a setback for President Trump, as the Democrats will be in a stronger position to derail Trump’s plans to boost fiscal stimulus and lower taxes. Investors have reacted on Wednesday by sending the dollar lower. The euro faces its next major test on Thursday, when the Federal Reserve releases its monthly rate statement. The Fed is expected to maintain the benchmark rate at a range of between 2.0% and 2.25%.

Irish Prime Minister Leo Varadkar said today that " with every day that passes, the possibility of having a special summit in November becomes less likely." He referred to the extra EU summit for Brexit and hinted that it's unlikely to reach a deal that soon.

Though, Varadkar also noted "we do have one scheduled for the 13th, 14th of December, so not getting it done in November doesn't mean we can't get it done in the first two weeks of December. But I think beyond that you're into the New Year, which I think wouldn't be a good thing."

Relief rally triggers strong gains ahead of US open

We're seeing something of a relief rally ahead of the open on Wall Street on Wednesday, as investors view the US midterms result favourably despite the Democrats taking back control of the House.

The result leaves us with the prospect of political gridlock in Congress, something that is not as undesirable as you'd think. Much of Trump's pro-growth and pro-market agenda was passed in the first two years of his term so losing control of one isn't the end of the world. From a markets perspective, the most important thing is that the blue wave never fully materialised as this could have led to the scaling back of some of those market-friendly policies, including tax reform.

While this was never the base case scenario, or in many people's view, even particularly likely, it was possible and that's enough to make investors nervous. Now we're seeing a collective sigh of relief, which is lifting equity markets and risk appetite is gradually improving. This comes on the back of a rotten October so there's plenty of room to the upside if investors sense opportunity.

Fed poses further risk on Thursday

There is one more risk event this week that may stop investors getting too excited just yet. The Fed meeting gets underway today and while no change in interest rates is expected this month – in fact, it's heavily priced out – we will get our first collective insight into if and how the central bank will respond to recent financial market volatility, especially as it was seemingly initially triggered by Chairman Powell's comments.

I don't expect the Fed to do anything different this month and instead for now treat it as a blip in an otherwise strong market. At the very most they could reference it as something they're monitoring but I doubt they'll do anything that raises any question marks over a rate hike in December. Still, as with the election, the passing of the meeting without drama could be the catalyst for more relief moves in the market which could be risk-friendly.

Gold rallies on weaker dollar

The return of risk appetite has been accompanied by a rally in Gold, which is benefiting from some weakness in the greenback. The dollar performed well during the turbulence in October and could therefore reverse some of these moves as markets recover which could provide additional support for the yellow metal. This could be especially true if the Fed does anything to signal it's become less hawkish than it was or that market reaction to Powell's comments were overblown.

Oil higher despite another inventory build

Oil prices are also benefiting from this improved risk appetite. Brent and WTI crude were both initially under pressure overnight after API reported a third consecutive sizeable inventory build. This saw Brent test the early summer lows and WTI trade at the lowest levels in seven months. The rebound we've seen overnight is possibly a sign that the market is a little oversold at this stage, having dropped more than 20% from its peak in little over a month in the case of WTI. I guess we'll see this tested later on today when EIA releases its inventory data

More from EU on US mid-term elections:

German Foreign Minister Heiko Maas tweeted, "It would be a misconception to now bet on course corrections from Donald #Trump. It remains the case: The US remains our most important partner outside Europe. To maintain this partnership, we need to re-measure and realign our relationship with the US."

Also, "More diverse, younger, more feminine-these are the winners #Midterms2018 of the, especially among the democrats. A good part of the electorate has thus confirmed the pioneering role that the country still plays, and hopefully in the future, in favour of diversity and freedoms."

https://twitter.com/HeikoMaas/status/1060107621443735554

https://twitter.com/HeikoMaas/status/1060130962388992000

WTI oil trades higher on Wednesday and holding in green for the first time since 26 Oct, when steep bear-leg commenced.

Reports that Russia and Saudi Arabia are discussing cuts in oil production in 2019 gave bears a breather, but recovery may extend if gathers momentum and improves overall negative sentiment, with initial reversal signal to be expected on violation of falling 10SMA ($64.59).

Oil price hit new 7 ½ month low at $61.30 on Tuesday, in extension of strong bearish acceleration, boosted by reduced fears of supply shortage in the market due to sanctions on Iran, as main producers increased output and the US allowed a number of major consumers to extend imports from Iran for some time.

Adding to negative outlook was stronger than expected build of oil inventories (API report on Tuesday showed 7.8 million barrels rise in US crude stocks vs previous week’s 5.7 million barrels build).

US EIA report is due later today and is in focus for fresh signals with stronger build than forecasted (2.4 mln bls build vs previous week’s 3.21 mln bls build) to present fresh obstacle to recovery attempts.

Res: 63.30, 64.12, 64.59, 65.37
Sup: 61.66, 61.30, 61.06, 60.80

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.14066
Open: 1.14265
% chg. over the last day: +0.30
Day's range: 1.14513 – 1.14738
52 wk range: 1.1299 – 1.2557

The technical pattern on the EUR/USD currency pair is ambiguous. Quotes are consolidating. At the moment, the local support and resistance levels are 1.14350 and 1.14750, respectively. Positions should be opened from these marks. Financial market participants took a wait-and-see position before the two-day Fed meeting.

The news feed on the economy of the Eurozone and the US is calm.

The price has fixed above 50 MA and 200 MA, which indicates the power of buyers.

The MACD histogram is in the positive zone, above the signal line, which gives a strong signal to buy EUR/USD.

Stochastic Oscillator is in the neutral zone, the %K line has started crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.14350, 1.14000, 1.13700
Resistance levels: 1.14750, 1.15300

If the price fixes above the resistance level of 1.14750, the EUR/USD quotes are expected to grow. The movement is tending to 1.15250-1.15500.

Alternative option. If the price fixes below 1.14350, it is necessary to look for entry points to the market to open short positions. The movement is tending to 1.14000-1.13700.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.30330
Open: 1.29981
% chg. over the last day: +0.55
Day's range: 1.30222 – 1.30286
52 wk range: 1.2662 – 1.4378

There is the bullish sentiment on the GBP/USD currency pair. During yesterday's and today's trading, the growth of quotes exceeded 100 points. At the moment, the key support and resistance levels are 1.30900 and 1.31600, respectively. Demand for the pound is still high amid optimistic news about Brexit. The GBP/USD quotes have the potential for further growth.

The news feed on the UK economy is quite calm.

Indicators point to the power of buyers: the price has fixed above 50 MA and 200 MA.

The MACD histogram is in the positive zone and continues to rise, which gives a signal to buy GBP/USD.

The stochastic oscillator is in the neutral zone, the %K line is crossing the %D line. There are no accurate signals.

Trading recommendations

Support levels: 1.30900, 1.30400, 1.29600
Resistance levels: 1.31600, 1.32000

If the price fixes above the resistance level of 1.31600, further growth of the GBP/USD currency pair is expected. The movement is tending to 1.32000-1.32200.

An alternative may be a drop in the GBP/USD quotes to 1.30500-1.30200.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.31087
Open: 1.31209
% chg. over the last day: +0.05
Day's range: 1.31068 – 1.31090
52 wk range: 1.2248 – 1.3387

There is a variety of trends on the USD/CAD currency pair. Investors expect additional drivers. At the moment, the local support and resistance levels are 1.31000 and 1.31300, respectively. Positions should be opened from these marks. We recommend paying attention to the dynamics of oil prices.

At 17:00 (GMT+2:00) the Ivey PMI will be published in Canada.

Indicators do not send accurate signals: 50 MA is crossing 200 MA.

The MACD histogram is near the 0 mark.

Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.31000, 1.30700, 1.30500
Resistance levels: 1.31600, 1.32000

If the price fixes below the round level of 1.31000, the USD/CAD quotes are expected to fall. The movement is tending to 1.30700-1.30500.

An alternative may be the USD/CAD currency pair growth to the round level of 1.32000.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 113.192
Open: 113.400
% chg. over the last day: +0.13
Day's range: 112.947 – 113.102
52 wk range: 104.56 – 114.74

The technical pattern on the USD/JPY currency pair is ambiguous. Trading instrument is consolidating. Investors expect additional drivers. At the moment, the local support and resistance levels are 112.900 and 113.350, respectively. Positions should be opened from these marks. The USD/JPY quotes are tending to decline.

Today, the publication of important news from Japan is not expected.

Indicators do not send accurate signals: the price is being traded between 50 MA and 200 MA.

The MACD histogram has moved to the negative zone, indicating the bearish sentiment.

The Stochastic Oscillator is located near the oversold zone, the %K line has crossed the %D line. There are no accurate signals.

Trading recommendations

Support levels: 112.900, 112.600, 112.300
Resistance levels: 113.350, 113.800

If the price fixes below the support of 112.900, the USD/JPY quotes are expected to decline. The movement is tending to 112.600-112.300.

An alternative may be the growth of the USD/JPY currency pair to 113.800-114.000.

Mild reaction to mid-term US elections

Reaction to the US elections was limited but expected. The Shanghai Composite was down 0.68%: Trump is free to continue his trade war. USD was lower, as combative US politics will head toward gridlock and disorder. Crude prices fell to USD 61.92 per barrel, down 4% in a week, despite expectations that sanctions on Iran will tighten. Trade-sensitive currencies had priced in the outcome, so were unchanged. We anticipate US stocks to rally on a smooth election and expectations that Trump’s expansionary policy will continue. No politician will stand in front of a tax cut. While the Federal Reserve Bank is still in a hiking cycle, the late-stage economic cycle will naturally decelerate the economy, despite Trump’s fiscal easing, suggesting that US yields are near a peak (10-year yields under 3.50%).

It’s a sad day for American liberals. President Trump’s strange behaviour and policy by the seat of his pants seem still to win support. Only with an unusually high voter turnout were Democrats able to gain the House, while Republicans strengthened their Senate majority. US cultural and political divisions have only deepened. A reactionary blue wave, expected to refute Trumps erratic leadership, failed to show up. Still, Democrats now have a check on Trump. We expect the House will try to impeach him.

German production boosts Euro

EUR/USD is expected to expand further, approaching the 1.1535 range, as German industrial production continues to grow at a constant pace, 0.80% annually and 0.20% monthly in September, strongly supported by the automotive sector. Factory orders continued to progress, with a monthly rise of 0.30% thanks to higher machinery and equipment orders.

The positive economic news comes after the announcement of Chancellor Merkel’s last term ending in 2021 and the continued weakening of Germany coalitions in Bavaria and Hesse state elections. Germany is showing signs of robustness as industrial activities remain solid. Along with high performance of the automotive industry, other sectors have been progressing sideways since the beginning of this year. We expect German Q4Q GDP to bounce back.

The US Dollar has depreciated about 63 base points against the Canadian Dollar since Tuesday trading session.

This bearish momentum continues to dominate the currency pair during the first half of today's session. Currently, the rate is moving towards the lower boundary of an ascending trendline at 1.3080.

However, technical indicators flash a mix signals. The technical sentiment demonstrates that the currency exchange rate will surge within this session.

The basic reason this decline was apparent in the morning session on Wednesday was that of the US midterm election results.