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08 October 2020

U.S Politics, Economic Data, and the ECB Minutes to Influence

It was a mixed day for the European majors on Wednesday. The DAX30 rose by 0.17%, whilst the CAC40 and EuroStoxx600 slipped by 0.27% and 0.12% respectively.

Economic data from Germany in the week continued to provide support to the DAX. While industrial production numbers disappointed, more than a 2-year composite PMI for September was good enough.

Market reaction to Trump’s announcement to postpone COVID-19 stimulus bill negotiations weighed, however.

After the European close on Tuesday, Trump had called off negotiations until after the Presidential Election. There mixed signals on Wednesday, however, when Trump tweeted that there would be support for airlines and other stimulus measures. The 2nd tweet led to a rebound in the U.S equity markets on Wednesday.

For the DAX: It was a bullish day for the auto sector on Wednesday. Continental and Daimler rallied by 4.10% and by 3.53%. BMW and Volkswagen saw more modest gains of 2.25% and 1.54% respectively.

It was a mixed day for the banks, however. Deutsche Bank rose by 1.86%, while Commerzbank slipped by 0.13%.

From the CAC, it was a mixed day for bank stocks. Soc Gen and BNP Paribas rose by 1.51% and by 0.21% respectively. Credit Agricole ending the day with a 1.34% loss, however.

It was another mixed day for the French auto sector. Peugeot ended the day flat, while Renault closed out the day with a 2.21% gain.

Air France-KLM found yet more support, rising by 3.23%, while Airbus SE fell by 1.58%.

The markets will be looking for some upbeat stats following Germany’s pickup in private sector activity.

On the monetary policy front, the ECB monetary policy meeting minutes will also draw attention later in the day.

Away from the economic calendar, Brexit talks will likely garner plenty of attention. At a minimum, talks will need to continue next week…

From the U.S, the weekly jobless claims figures will provide direction later in the day. Ahead of the European open, the Vice Presidential debate will set the tone as Pence and Harris face off this morning.

Following Trump’s tweets on Wednesday, which led to a rebound in the U.S markets, there will be early support ahead of the European open.

NZD/USD risks further downside – UOB

NZD/USD could grind lower to the 0.6540 region in the near-term, suggested FX Strategists at UOB Group.

24-hour view: “Yesterday, we held the view that NZD ‘could drop further from here but any weakness is viewed as part of a 0.6560/0.6620 range’. However, NZD traded in a quiet manner between 0.6572 and 0.6602 before closing largely unchanged at 0.6582 (-0.03%). The underlying tone still appears soft and we continue to see chance for NZD to drift lower to 0.6560. For today, a sustained decline below this level is unlikely (next support is at 0.6540). Resistance is at 0.6600 but the stronger level is at 0.6615.”

Next 1-3 weeks: “We highlighted yesterday that ‘upward momentum is lackluster and the odds for a sustained advance above 0.6690 are not high’ and we expected NZD to ‘trade at a higher range of 0.6580/0.6710’. The sudden and sharp sell-off during NY hours was unexpected as NZD plunged to a low of 0.6583. While the rapid drop appears to be running ahead of itself, downward momentum has improved and NZD could test the major support at 0.6540. A retest of last month’s low of 0.6512 is not ruled out but for now, the prospect for such a move is not that high. Overall, NZD is expected to stay under pressure unless it can move above 0.6645 (‘strong resistance’ level).”

Gold Price Futures (GC) Technical Analysis – Strengthens Over $1889.70, Weakens Under $1877.10

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the December Comex gold on Thursday is likely to be determined by trader reaction to the main 50% level at $1889.70.

Bullish Scenario

A sustained move over $1889.70 will indicate the presence of buyers. The first upside target is $1902.10. This level stopped the rally on Wednesday. Overtaking this level could lead to a test of $1917.40. The main trend will change to up if buyers can take out $1927.00.

The daily chart indicates there is plenty of room to the upside over $1927.00 so don’t be surprised by an acceleration into $1970.10 over the near-term.

Bearish Scenario

A sustained move under $1889.70 will signal the presence of sellers. This could trigger a break into $1880.00, followed closely by $1877.10. This is a potential trigger point for an acceleration into the next potential downside targets at $1851.00 and $1842.60.

DAX Bears Might be Waiting at the POC Zone

W H5 and D H5 are resistance pivot points which also make a strong confluence with 88.6 % fib. 13050-60 zone could reject the price lower. Targets are 12958, 12889 and 12797. If D L5 breaks then next level will be 12725. However if we see the close above 13065, the price will remain bullish and upward bounce might target 13129.

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