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Market review 03 November 2020

03 November 2020

Calm before the US elections storm, gold extends recovery, Bitcoin falls

Markets are relatively calm as US Election Day dawns in Europe. Trump is trailing Biden yet the battle is close in swing states. The dollar is stable, gold and oil have been edging higher and Bitcoin is on the back foot. Coronavirus cases continue rising in the northern hemisphere.

US elections: The final polls toward the US Presidential Elections are pointing to former Vice-President Joe Biden having a wide lead against President Donald Trump in national polls, but narrower in critical swing states. nearly 100 million Americans have already voted – some 72% of the total 2016 vote count.

Markets prefer a decisive result, preferably Biden winning the White House and Democrats flipping the Senate, an outcome that would enable fiscal stimulus. The second-best option is a victory for Trump. On the other side, a Biden WH and a GOP-controlled Senate could result in a small relief package. The nightmare scenario is a protracted election process that results in a contested election and a constitutional crisis.

UK Prime Minister Boris Johnson is facing a bitter battle to approve his new lockdown, set to enter into force on Thursday. GBP/USD has stabilized around 1.29.

AUD/USD is trading above 0.70, relatively stable after the Reserve Bank of Australia cut interest rates to 0.1% as expected and announced it would expand its bond-buying scheme. RBA Governor Phillip Lowe and his colleagues said their actions would contribute to a lower exchange rate.

New Zealand publishes its jobs figures for the third quarter, which are set to show a drop in employment and an increase in the unemployment rate.

Oil prices have bounced from the lows as Hurricane Zeta knocked down production in the Gulf of Mexico. Moreover, OPEC+ countries seem keen on boosting prices.

US Factory Orders are set to show an increase in September. The ISM Manufacturing Purchasing Managers’ Index beat estimates with 59.3 points, raising expectations for Friday’s Nonfarm Payrolls.

Bitcoin is on the back foot after regulators in Hong Kong demand that all cryptocurrency platforms be regulated. BTC/USD is changing hands at around $13,400.

Nasdaq 100 holds key support to suggest a Biden win may not be the consensus – Credit Suisse

“Nasdaq 100 has weakened into the election but importantly is holding trend support from the lower end of its range from July at 10950, maintaining the scenario we could potentially be looking at the construction of a bullish ‘triangle’ continuation pattern.”

“Given that a commonly held market view is that a Biden presidency would likely be a headwind for Tech, we would probably have expected to see Tech lower if investors were heavily skewed this way.”

“Above 11695 post the election is needed to a bull ‘triangle’ scenario for strength back to the top of the ‘triangle’ at 12035/75. Beyond 12205 though is needed to suggest the range has been resolved to the topside with resistance next at the 12440 record high and eventually 12965/85.”

“Below 10680/75 post the election would mark an important top and likely further weakness in Q4 to 10275 initially, then the 200-day average at 9942.”

EUR/USD: The 1.1612 September low holds the initial test – Commerzbank

EUR/USD holds its recent low of 1.1612 but Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, maintains a neutral to negative stance.

Key quotes

“EUR/USD has sold off to to the recent low at 1.1612, which has held the initial test.”

“Intraday rallies are indicated to be likely to fail 1.1680/1.1715, and above here lies the 55-day ma at 1.1783, we will assume a negative bias below here.”

“Intraday Elliott wave counts are now negative and implying scope for the 1.1612 mark to be eroded. Below 1.1612 would target the 1.1495 March high, and potentially the 55-week ma at 1.1413.”

Gold bulls see the last dance on US election day amid caution trading

Gold extended its rebound into a third straight session on Monday, although remained below the $1900 mark undermined by falling US inflation expectations over the past two weeks, in absence of a new fiscal stimulus aid. XAU/USD bulls insist on US election day but the upside appears limited, FXStreet’s Dhwani Mehta briefs.

Key quotes

“Gold’s fate hinges on the outcome of the 2020 Presidential election. The presidential race narrows in six swing states, as Joe Biden continues to hold a narrow lead over Donald Trump in the final stretch on Tuesday. In the meantime, a jittery market mood combined with rising coronavirus concerns could likely keep the precious metal in a familiar trading range.”

“Recapturing the $1900 level is critical to unleashing more gains, with a test of the pattern target at $1910 due on the cards.”

“The 50 and 100-HMA bullish crossover adds credence to the bullish bias. The hourly Relative Strength Index (RSI) holds above the 50 level despite the latest leg down, leaving buyers hopeful.”

“Acceptance below the 21-HMA at $1891 could trigger a sharp drop towards $1884, almost where the upward-sloping 50-HMA coincides with the 100-HMA.”

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