EUR/USD, USD/JPY flows - dollar focus remains on tech out of Democrat sweep

Big results in the midterms the dominant story with Democrats taking control of both House (gaining 25 seats so far) and Senate (53 to 42), including some notable results in states like Texas, particularly in focus for governance of areas like the AI build out.

In terms of kneejerk cross asset moves, the focus was initially focused very much on those implications for the tech sector, as well as the more general typical assumptions around gridlock leading to less scope for continued pro-cyclical fiscal ‘beautiful bill’ ramp ups. Reaction has moderated though with Nasdaq back to around -0.4% now from more than 2% off at one point and US10s retesting recent day’s lows and still sitting just through 5%, before settling.

Dollar likewise sitting mid-bar now, with USD/JPY having tested back to the lower 157s before sitting on 158 and the EUR/USD new rebound high of 1.1260/65, testing the mid Oct highs, before paring.

Generally, the conviction of the results has a positive aspect, inasmuch as it looks to avoid the close result scenario, and all the dispute baggage that could go along with it. 

The bigger focus, election or not, remains current tech tone though ultimately, and performance here is going to be key to any further long dollar retreat. The Nasdaq pullback on the e-mini spiked nearer but not quite fully into the July 27200~ lows before recouping to the pre-election zone. This remains a key reference point. A downtrend from early Oct still remains in place. In coming sessions were the July lows to give way then that would be implying a more toppy look still on the current timeframe and so potential for wider spillover to FX.