Daily market analysis

Nov 03, 2020

November 3, 2020

Daily Market Analysis

 

Market Focus

US stocks rebounded from the worst week since March as investors bet on the energy, materials, and industrial sectors ahead of Tuesday’s U.S. presidential election. Crude oil rose the most in more than three weeks. Dip buyers helped the benchmark S&P500 finish the day up by 1.2%, though it closed down from the highs of the day. It slumped 5.6% last week. The tech-heavy Nasdaq 100 lagged behind, weighed down by Apple Inc. as investors rotated from so-called work-from0home stocks and into sectors that would benefit from more stimulus.

 

With one day left before the American presidential election, volatility returned, with the Chicago Board Options Exchange’s Volatility Index remained elevated. Polls continue to show Democrat Joe Biden ahead, though battleground states remain tight. The U.S. reported a slight slowdown in virus cases over the weekend, but several states continued to notch record numbers of infections.

 

Once the U.S. election passes, investors will contend with the Federal Reserve delivering a policy decision Thursday before the October jobs report Friday.

 

Oil clawed back earlier losses amid signals that Russia, a key OPEC ally, is in talks to possibly postpone the group’s planned output hike in January. Russia, which depends on crude as a key export, saw the ruble weaken to the lowest since March against the dollar.

 

Virus developments are also front and center, with daily cases continuing to surge in many parts of the world. The UK’s prime minister ordered England into a four-week partial lockdown, all but shuttering the economy, while other European countries prepared to increase restrictions.

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Market Wrap

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Main Pairs Movement

   EURUSD is among the worst performers on Monday, down against the greenback to the 1.1620 region as upbeat data overshadowed by coronavirus concerns. USDJPY, on the other hand, remains trading on a bid tone on Monday, appreciating more than 0.3% daily against the Japanese yen, and reaches a resistance area at 104.90 where the bulls have been halted several times over the last week. The Aussie is holding onto modest gains after briefly piercing the 0.7000 level at the beginning of the week. The RBA is expected to slash the cash rate to a record low of 0.1%.

  WTI is attempting a tepid recovery from five-month lows of $33.85 reached in early Asia, as the bulls were rescued by the upbeat Chinese Caixin Manufacturing PMI and a rebound in Japanese exports orders.

 

US Election

Countdown

Presidential Election: 1 Days

Electoral College: 42 Days

Polls

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US Election Day Schedule

Daily Wrap

  President Donald Trump signed an executive order establishing a “1776 Commission” that will promote “patriotic education”. Democratic nominee Joe Biden leads President Donald Trump in Ohio and Florida. The Susan B. Anthony List said it spent the most of any group opposing abortion in an election. And the Department of Justice is sending election monitors to 18 states, including key battleground counties.

  Joe Biden’s favorable odds in Tuesday’s US presidential election have been helping climate change related stocks in recent months. However, if the Democratic candidate does win, there could be some pullback in these stocks right after the election. However, since most of the Biden related thematic stocks have done well globally over the past three months, it is not certain that a pullback can be seen right after the election until investors gain more clarity on how material the policy changes. In other words, investors are recommended to pause and focus on materiality and timelines of upcoming policy decisions to avoid disappointments that follow the pre-event build up.

Absentee Voting

Technical Analysis:

GBPUSD (4-Hour Chart)

  GBPUSD is trading around 1.2905 at the time of writing. The underperforming sterling seems to be a result of the UK announcing a nationwide lockdown to curb the jump in coronavirus cases. Nevertheless, the downside moves remained contained above the 1.2900 zone with the pound underpinned by market hopes of a Brexit deal. From a technical perspective, the GBPUSD might continue its bearish momentum throughout the week given that the trend is well-supported by the 15-Day SMAVG. The short-term key support sits at 1.2900, and the next support can be seen at 1.2863. Conversely, if the Cable can stage a move above the 1.3008 zone, it would imply that the GBPUSD has overcome the ongoing downward pressure.

Resistance: 1.2973, 1.3009

Support: 1.2900, 1.2863

 

USDCAD (4-Hour Chart)

  The Loonie slides towards 1.3220 zone, erasing its modest gain that took place earlier in the day. The surge of the Loonie that took place last Friday was driven by a sudden drop in the WTI price, but with a jump in the price of a barrel of WTI today (as indicated in the chart below) and the uncertain US political environment, traders today have unwind some of their greenback bullish bets.

Nevertheless, since concerns over the stricter measures to curb the second wave of Covid-19 infections are going to undermine the global demand for oil in the mid, long-run, it is hard for the Canadian dollar to establish any substantial bullish momentum. Looking at the interactions between 15-Day SMAVG and 60-Day SMAVG, we would expect that a bullish Loonie may persist, and today’s drop may be merely a sign of investors’ increasing concerns over the upcoming election.

Resistance: 1.3280, 1.3337, 1.3373

Support: 1.3222, 1.3195

 

XAUUSD (4-Hour Chart)

  The yellow metal stages a modest rally on Monday, pushing the price of Gold per ounce towards the $1895 zone. Thanks to investors’ mixed sentiment over the greenback on Monday, the XAUUSD are making some substantial recovery from its one-month low of $1862 that took place last Thursday. From a technical perspective, the gold’s upside movement is supported by Thursday’s monthly low. Additionally, given that the RSI still sits below the 70 overbought threshold and is consistently moving upward, there is still room for the yellow metal to progress positively. A break above the $1895 zone would confirm a bullish trend. On the downside, the first short-term support can be seen at $1888, then in $1873 and $1863.

Resistance: 1895.63, 1912

Support: 1888.19, 1873, 1863

Economic Data

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Currency

Data

Time (TP)

Forecast

AUD

RBA Interest Rate Decision

11.30

0.10%

AUD

RBA Rate Statement

11.30

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BRL

BCB Copom Meeting Minute

19.00

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USD

U.S. Presidential Election

21.00

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