The financial week kicked off with the US Dollar in retreat, as a pullback in the so-called “Trump trade” pressured the greenback lower. Amidst small moves in US Treasury yields, market caution spiked with two major events on the horizon: Tuesday’s US election and the Federal Open Market Committee (FOMC) meeting on Thursday.

Key Market Movements as of Tuesday, November 5:

US Dollar Index (DXY) Sinks Below 104.00

The US Dollar Index (DXY) broke the 104.00 level, sliding to new two-week lows as investor caution set in. Uncertainty around the election and the upcoming Federal Reserve decision added to the downward pressure on the dollar, while traders braced for several economic data releases later in the day. On the docket are the ISM Services PMI, the S&P Global Services PMI, and the American Petroleum Institute’s (API) weekly report on crude oil inventories—all events likely to impact the greenback.

EUR/USD Rallies, Then Pauses

The Euro continued its climb past the 1.0900 threshold against the dollar, though its upward momentum eased as the North American trading session wound down on Monday. Tuesday will bring speeches from European Central Bank (ECB) officials, including President Christine Lagarde and board member Isabel Schnabel, which could influence the Euro further depending on their tone regarding inflation and growth in the eurozone.

GBP/USD Fights for 1.3000

Sterling also benefited from a weaker US Dollar, gaining on Friday’s uptick, though it faced resistance just before the critical 1.3000 level. British markets are now eyeing the British Retail Consortium’s Retail Sales Monitor and New Car Sales figures, as well as the S&P Global Services PMI. The data may further bolster—or hinder—GBP/USD as traders gauge the health of the UK economy.

USD/JPY Drops to Test Key Support

The US Dollar traded sharply lower against the Yen, with USD/JPY falling to the 200-day simple moving average (SMA) around the mid-151.00s. The move reflects rising safe-haven demand for the Yen, amplified by investor caution in the lead-up to the US election and Japan’s own economic releases, including the Bank of Japan’s meeting minutes and the Jibun Bank Services PMI.

AUD/USD Advances Past 0.6600

In Australia, the Aussie Dollar climbed to multi-day highs, reclaiming the 0.6600 level and approaching its 200-day SMA. Market attention in Australia now shifts to the Reserve Bank of Australia’s (RBA) upcoming interest rate decision, which could provide further direction for the AUD if the RBA signals any shifts in policy.

Commodities Rally: Oil and Gold Edge Higher

Oil Prices Lifted by OPEC+ Decision

The oil market saw a promising start to the week, with West Texas Intermediate (WTI) crude prices climbing above $71.00 per barrel, marking a two-week high. This uptick follows OPEC+’s decision to delay its planned increase in oil output until December, easing concerns over potential oversupply and providing support to oil prices.

Precious Metals Steady

Gold prices rose modestly, hovering near $2,750 per ounce as a weaker dollar and flat US yields supported the yellow metal. Silver followed suit, rebounding from three days of losses to approach the $33.00 mark per ounce. Both metals are benefiting from the dollar’s downward trend, and further volatility in the dollar or yields could keep these commodities in focus throughout the week.

Looking Ahead: Key Events to Watch

With the US election and the Federal Reserve’s FOMC meeting just days away, markets are expected to remain volatile. The FOMC’s decision will be particularly crucial, as traders watch for any updates on the Fed’s rate hike trajectory and comments on economic conditions. A dovish or hawkish tone from the Fed could influence not only the US Dollar but also global markets more broadly. Additionally, oil inventory data, European economic updates, and PMI readings from various countries will provide insight into the economic landscape as we approach the year-end.