Forex Today: Risk-on ahead DXY down & JPY crosses bid, Democrats take House in US midterm elections

Forex today saw the US dollar took a beating against majors on reports that the US Congress is heading for a split.

Democrats are set to take control of the House and Republicans will likely retain the Senate, according to NBC News projections.

The pair of a Democratic-controlled House  and a Republican-controlled Senate, if confirmed, would make it hard for Trump to push forward any major fiscal initiative. As a result, investors may start scaling back expectations of a restrictive interest rate policy in the US. Further, Democratic House may trigger a political turmoil in Washington.

These developments are dollar bearish. Hence, it is not surprising to see the greenback lose altitude. So far, however, the major equity index futures haven’t shown any signs of stress. For instance, the S&P 500 futures are up 0.26 percent.

Notably, the JPY crosses posted gains in Asia and are looking north at press time, likely pointing to a risk-on action in the equities. The message delivered by the JPY crosses gels well with the historical data, which shows that the stock market tends to perform well when Washington, D.C., is locked in the “gridlock”.

The best S&P 500 returns under a Republican president occurred while Congress was split, with that scenario producing 12 percent annual returns, according to CNBC report quoting data from Bank of America Merrill Lynch.

To cut the long story short, a risk reset is likely in the offing for the financial markets and the American dollar could suffer deeper losses in Europe.

Major News in Asia

• Breaking News: EUR/USD challenges highs as Democrats clinch the House                                                                                                

• US mid-term election update: Democrats need a net gain of 23 seats to clinch a majority in the House

• WH Spokeswoman Sanders: Trump priorities won’t change even if Dems take House

• NZ: Unemployment rate slumps to 10yr low of 3.9% – TDS

• BoJ’s Funo: US election outcome likely within market expectations

• SNB’s Zurbruegg: Central bank still ready to intervene in currency markets if needed

What’s brewing in the Majors?

• EUR/USD: Falling wedge breakout looks like a done deal
• GBP/USD: Better bid at three-week highs, having cleared the seven-month-long falling trendline hurdle in Asia.
• USD/JPY: Anti-risk JPY is pushing higher, but is underperforming other majors.
• AUD/USD: 100-day exponential moving average (EMA) of 0.7267 is capping gains.
• NZD/USD: Eyeing 200-day EMA hurdle of 0.6812 on stellar New Zealand jobs report.
• USD/CAD: Chipping away at the support of the trendline rising from Oct. 1 low.