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Got that déjà vu feeling? The dollar is once again on the back foot ahead of European morning trade as we see risk keep calmer after a retreat in US trading yesterday.
Of note, EUR/USD is keeping above its 100-hour moving average @ 1.2266 as buyers look to try and keep near-term control. AUD/USD also leaned on its own 100-hour moving average yesterday before climbing back above 0.7700 in trading today.
Elsewhere, the pound is faring a little better today after some struggles yesterday with EUR/GBP bouncing back above 0.9000 but meeting resistance from its 100-day moving average @ 0.9034 for the time being.
Gold and silver remain standout performers in light of the slight dollar pullback yesterday, with the former keeping close to $1,940 still while the latter continues to trade above $27 at its highest levels since September last year.
As for the trading day ahead, the Georgia runoffs present the most considerable risk factor for the market but I would argue it is largely a short-term excuse for real money flows to pick a side of the coin to start the new year.
There is the distinct possibility that the results won't be known for days but the market is always quick to pick up on the finer details - similar to the November presidential election - so don't expect the market to be blinded for too long.
Even more so in the case of a Republican comfortably leading in either of the two races.
In any case, even a Democratic sweep doesn't do much to change the overall narrative in the market if you really want to drill down into the nitty gritty. However, the market could still use all of that as an excuse to put on some early positioning to start the year.
A risk rally after a 'blue wave'? It must be to do with better stimulus prospects and more spending set to follow. A risk selloff after a 'blue wave'? It must be to do with concerns about corporate taxes that could follow (even if it is extremely unlikely to pass).
A risk rally after Republicans hold the Senate? It must be to do with the status quo from last year being maintained. A risk selloff after Republicans hold the Senate? It must be to do with disappointment on a smoother legislation passage in Congress.
If anything, the big picture narrative is more key regardless of the results and that is largely to do with the Fed and the printing press. As long as that remains as it is, the market can always rely on the same tailwind it got from trading last year to translate to this year.
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