Daily Market Report - 4th Nov 2020

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EURUSD

The dollar is down and Wall Street is up as investors long to know who will be the next US President The EUR/USD pair surged to 1.1739, heading into the Asian opening trading around the 1.1700 figure. Polling stations will be closing between 11:00 pm GMT and 06:00 am GMT, and the outcome on the most critical states will be out early Wednesday, and whatever those said, markets are set to rock. With 538 electors in the country, a candidate needs an absolute majority of 270 or more to win the election.

It may happen, however, that none of the two main candidates gets enough electoral votes, amid more people voting by mail due to the ongoing pandemic. The recount of mail-in ballots may take several days and even weeks. It’s quite hard to imagine that the current risk-on scenario will continue throughout the Asian session unless there’s a clear bias in the initial results of the US presidential election. Turmoil is expected in the country and hence, in financial markets.

The dust will take some time to settle and macroeconomic data may be ignored for the rest of the week but will remain relevant as a barometer of economic health. This Wednesday, Markit will publish the final versions of its Services PMIs for the EU and the US, while this last will unveil the ADP survey for October and the official ISM Services PMI for the same month, foreseen at 57.5.

The EUR/USD pair is mildly bullish in the short-term, holding near the mentioned daily high. The 4-hour chart shows that it keeps advancing above its 20 SMA, which loses bearish strength, although still trading below the larger ones. Technical indicators hold within positive levels but have lost their bullish momentum. The bullish case will be clearer on a break above 1.1770, the immediate resistance level.

Support levels: 1.1690 1.1650 1.1610

Resistance levels: 1.1770 1.1820 1.1875

USDJPY

The USD/JPY pair edged lower on Tuesday, amid the broad dollar’s weakness. The decline, however, has been limited by substantial demand for high-yielding assets, in detriment of the safe-haven yen. Wall Street advanced, with the three major indexes adding roughly 2% each. Government debt fell with the yield on the benchmark 10-year Treasury note hitting a daily high of 0.90%.

Japan started the day with a holiday and without offering macroeconomic data. This Wednesday, however, the Bank of Japan will publish the Minutes of its latest monetary policy meeting. The focus, however, will be on the outcome of the US presidential election, and whether a clear winner can be called in the near-term.

The short-term picture for USD/JPY is neutral-to-bearish, according to the 4-hour chart. In the mentioned time-frame it has broken below its 20 SMA, which remains below the larger one. Technical indicators have eased from daily highs, to stabilize around their midlines. A steeper decline will be clearer on a break below the 104.00 area, as the pair bottomed around it in the last two months.

Support levels: 104.30 103.95 103.50 

Resistance levels: 105.05 105.40 105.85 

GBPUSD

The GBP/USD pair surged to 1.3078 on the back of the dollar’s sell-off, and despite discouraging Brexit headlines. Financial boards are all about US elections this Tuesday, with equities soaring and the greenback plummeting ahead of the result. Regarding Brexit talks, reports indicated that trade negotiations are still stuck when it comes to a level playing field and fisheries, the two main issues that stalled progress months ago. However, progress was reported in other areas, including social security. EU’s chief negotiator Michel Barnier will report on progress to EU ambassadors this Wednesday.

The pair will likely continue trading alongside risk-related sentiment during the upcoming sessions, although the pound won’t ignore Brexit-related headlines once the picture on US election is clearer. This Wednesday, Markit will publish the final UK Services PMI foreseen unchanged at 52.3 in October.

The short-term picture for the GBP/USD pair indicates that chances are on the upside. The 4-hour chart shows that the pair has recovered above all of its moving averages, with the 20 SMA losing its bearish strength. Technical indicators remain within positive levels, the Momentum easing but the RSI firm around 63. Nevertheless, the upcoming direction will depend on the market’s reaction to the US presidential elections. Bears will take over on a break below 1.2950.

Support levels: 1.3000 1.2950 1.1905

Resistance levels: 1.3085 1.3130 1.3180

AUDUSD

The AUD/USD pair fell to a daily low of 0.7027 following a mostly dovish RBA. The central bank delivered as it cut rates to a record low of 0.1% as widely anticipated. Furthermore, policymakers said that they plan to buy A$100 B of 5y-10y bonds over the next 6 months. However, Lowe and company remained optimistic about economic progress in the near-term, adding that negative rates are extraordinarily unlikely.

Another negative news for Australia came from China, as the country is said to have ordered commodities traders to stop importing Australian products including coal, barley, copper ore and concentrate, sugar, timber, wine and lobster. The pair, however, soared to 1.7174 on the back of dollar’s sell-off and soaring equities. Early Wednesday, the country will publish the October AIG Performance of Construction Index, and September Retail Sales.

The AUD/USD pair is trading around 0.7140 as the US session comes to an end, maintaining a positive tone in the short-term. The 4-hour chart shows that the pair is developing above all of its moving averages, with the 20 SMA turning higher far below the larger ones. Technical indicators, in the meantime, ease from overbought levels, heading lower but within positive levels.

Support levels:0.7125 0.6990 0.6950

Resistance levels: 0.7175 0.7220 0.7265

GOLD

Risk-on mood dominated the markets on Tuesday in the light of the elections in the US. As the Democrat candidate Biden is leading the polls, markets are pricing a clean Democrat win and a resolution about the stimulus package finally. As the Democrat’s proposal is bigger than the Republicans, Gold will definitely benefit from the package approval as the USD is expected to decline. The USD index DXY slid below 94.00 again with the risk appetite and the US equity markets rallied. Also, Gold hit two-weeks high and faced resistance at $1,910 managing to stay over $1,900. On the other hand, any event that might cause uncertainty about the outcome of the elections will reverse the risk appetite causing the precious metals to decline. As the postal votes reached almost 100 million right before the election day, the outcome might not be clear immediately and therefore, markets might face volatility until the official results are announced.

Below the $1,860 level, the supports can be followed at $1,763 ($1,451-$2,075 61.80%) and $1,700 levels. Over the $1,860 level, the resistances can be followed at $1,900 with $1,956 ($1,451-$2,075 38.20%) and $2,000 levels.

Support Levels: $1,860 $1,763 $1,700

Resistance Levels: $1,900 $1,956 $2,000

SILVER

Silver also extended its move-up to its third consecutive day of trading as markets are betting on a Democrat win. The risk appetite favours Biden’s win as all the latest polls bet on the Democrat candidate. In case of Democrats taking both houses of Congress would indicate that further stimulus will be on the agenda. The coming days all the market move will be driven by the elections in the US while a delayed result will most likely create volatility. On the other hand, despite the strong move-up seen in Gold, Silver was hesitant to join the move lifting Gold to silver ratio back again 79.00.    

Below the $22.90 level ($11.63-$29.86 38.20%), the supports can be followed at $20.75 ($11.63-$29.86 50.00%) and $18.42 ($11.63-$29.86 61.80%). Over the $22.90 level, the targets up can be followed at $25.21 ($11.63-$29.86 23.60%), $26.00 (August-September support), $27.00 and $28.00 levels.

Support Levels: $22.90 $20.75 $18.42

Resistance Levels: $25.21 $26.00 $27.00

CRUDE WTI

WTI extended its move-up on Tuesday after bottoming to its lowest level in five months on Monday. Markets are heavily pricing Biden win and as a result, a bigger stimulus package might be on the table with better trade relations with China. Both possibilities are supportive for the oil prices and markets are betting on this positive scenario for WTI at the moment. On the other hand, the move up seen in WTI is limited by oversupply, demand and stock fears. Lately, oil stocks in the US continued to pile-up while the global oil supply increased. Also, as the second wave of the pandemic forced European countries to re-announce partial lock-down measures, demand worries limited the gains for oil prices.

Technically speaking, $33.00 zone stands as the breakdown level to confirm a bear market has started. Below the $37.00, the supports can be followed at $33.23 ($0.00-$43.49 23.60%), $26.88 ($0.00-$43.49 38.20%) and $21.75 ($0.00-$43.49 50.00%). Over the $37.00 zone, resistance can be followed at $39.00, $40.00 and $42.00 zone (July-august consolidation range).

Support Levels: $33.23 $26.88 $21.75

Resistance Levels: $39.00 $40.00 $42.00 

DOW JONES

Dow Jones once again started the day with a bullish gap as the markets are willing to price a Democrat win in the US. Investors believe that Biden can create more foreseeable conditions for the markets with better trade relations with China. Also, Democrats are willing to sign a bigger stimulus package which will support household spending and economic activity in the US. Last-minute polls favour a clean Biden win while the composition of the Congress is still unknown. Participation in the election was significantly high while postal votes hit almost 100 million before the election date mostly because of the pandemic. As a result, there might be a delay for the outcome of the elections and markets might face volatility until the results are out. On the macro side, New orders for manufactured goods, Factory Orders, in the US rose by $3.2 billion, or 0.7%, to $470.1 billion in August, the data published by the US Census Bureau showed on Friday. This reading followed July's increase of 6.5% (revised from 6.4%) and missed the market expectation of 1%. The upbeat data also supported the risk-mood lifting the indexes further.       

If Dow Jones keeps its stance over 27,000 level decisively, 27,583 (June 2020 high), 28,000 and 28,402 levels can be followed as resistances. Below the 27,000 level, the supports can be followed at 26,000 with 25,210 (29,568-18,158 61.80%) and 24,690 (2020 April-May resistance) levels.     

Support Levels: 26,000 25,210 24,690

Resistance Levels: 27,583 28,000 28,402

MACROECONOMIC EVENTS

* All the Moving Average support and resistance levels are dynamic by nature. Means when the price approaches the Moving averages, slight variation occurs in the forecasted Moving Average support and resistance levels. Previous few days’ intraday levels are also signicant while trading the current day as the price tend to hover around these levels for some time. Levels in red indicate strong, critical or vital.

Please remember that trading financial markets carry a high degree of risk to your capital. It is possible to lose more than your initial stake. Leveraged products may not be suitable for all investors, therefore please ensure you fully understand the risks involved and seek independent advice if necessary.

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