After markets priced in a Democratic win, now the expectations of a decisive presidential election win for Joe Biden fade – This boosted bonds and lifted the USD as a set of trades based on a “blue wave” Democratic sweep of the White House and Congress stumbled. Initially, overnight Asian stocks gained (Nikkei and Topix are up 1.7% and 1.2%), following a strong close on Wall Street where speculation of big spending programs following a “blue-sweep” supported sentiment. Bunds are following Treasuries higher, with the German 10–year yield down -4.6 bp at -0.67%, while the US 10-year rate has dropped -12.8 bp to 0.773% as investors start to price out a strong victory for the Democrats in the US election and with it speculation of a huge spending spree. Eurozone peripheral markets are also supported, but spreads are widening as risk appetite fades and stock markets struggle. GER30 and UK100 futures have extended losses to now -1.25 and -0.8% respectively. US futures are mixed, with USA30 in the red. Alibaba Group Holding Ltd tumbled in Hong Kong after China halted the initial public offering of Ant Group Co. in which Alibaba holds a large stake.
Uncertainty over the US election outcome is likely to last for a while and will likely continue to underpin volatility in markets today. In New York time you can see a very explanatory article on what happens if the election results are contested.
- USDIndex – rallied but still flat is the wider picture – Trump agitating the process with claims that his rivals are attempting to manipulate the results, has driven the Dollar higher on a safe haven bid.
- EUR – turned to 4-month low at 1.1600. Currently below S1: 1.1650
- GBP – drifted 197 pips lower. Currently at 1.2499 with Support at 1.2850
- AUD – back to 0.70 area from 0.7225 highs. S2 at 0.6974, PP at 0.7120
- CAD – rebounding as risk appetite fades – Currently at 1.3285
- CHF – reversed around 70% of week’s losses
- BTC – broke 2019 high but turned below it – Key resistance area
- GOLD – lower at 1890 – S2: 1878 and S1 at 1.1894
- USOil – Oil prices meanwhile remain supported by reports that OPEC+ will push back the planned easing of output cuts and the front end WTI future is trading at $38.84 – Lower into EU session
TODAY: US election will remain in focus, Fed also starts its meeting today, with the announcement due tomorrow, but for what it is worth today’s local data releases will mainly focus on US ADP change and final services PMIs for October, which will also be bond friendly as the sector is hit by renewed virus restrictions across Europe.
Biggest gainers are USDMXN and USDZAR (+3.18% and +2.46%) – USDMXN rebounds its daily outlook as it spikes in a day to nearly 50% recovery from the September 24 downleg. Asset traded above all daily MAs while it broke R3 of the day (which could follow a pullback) however the asset’s rally does not look to run out of steam yet as fast MAs and upper BB align higher, while MACD posted a bullish cross with RSI close to 64. 1H ATR at 0.22229 and Daily ATR at 0.33306.
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Andria Pichidi
Market Analyst
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