At last it is Election Day and the polls in the US suggest that Joe Biden has maintained his lead over the weekend against Donald Trump although the key battleground states remain tightly contested. Stock markets have been mixed with both the DJI and the S+P ending higher, underpinned by strong US manufacturing data, and the Nasdaq a little lower, weighed down by some weakness in Amazon, Facebook and Apple (-2%, -0.5% & -1% respectively). Overall, the markets have been relatively calm on Monday but note that the election will be closely followed by Thursday’s FOMC Meeting and then, on Friday, by the US employment/NFP figures, so we could see some highly volatile conditions by the end of the week.

The FX markets saw continued demand for the US$, particularly against Sterling which is under pressure after the announcement of lockdaown2.0 in the UK which will run through until early December, and also because the Brexit talks seem to be going nowhere, particularly in relation to the Northern Ireland issues.  The Euro traded a narrow range but is ending towards session lows despite the strong EU Mfg PMI reading – the Eurozone Manufacturing PMI was finalised at 54.8 in October, up from September’s 53.7, the strongest reading in 27 months. US$Jpy ended a little higher albeit that the pair was unable to overcome 105.00, while the Aud$, which sank briefly below 0.7000 on Monday in Asia, is actually now at session highs (0.7052)ahead of today’s RBA Meeting at which an easing of policy is widely expected – see below.

Elsewhere, Gold put on around 0.8% (Silver +1.3%) as some-safe haven demand set in ahead of the election, while oil also reversed its recent decline after reports that Russian oil companies are in discussions with government authorities over a possible delay to plans to increase its oil production from the start of 2021. WTI pt on 3% on Monday and helped to underpin the energy sector in the stockmarkets.

In the US, the ISM manufacturing data showed that activity accelerated more than expected in October, with new orders jumping to their highest level in nearly 17 years amid a shift in spending toward goods like motor vehicles and food as the pandemic drags on. The figures showed that the manufacturing index increased to 59.3 last month, the best reading since November 2018 and followed a reading of 55.4 in September.

Looking ahead to Tuesday, a Melbourne Cup holiday in Victoria, the session will begin with the RBA Interest Rate Decision where the general expectations are for a 15bp rate cut to the cash rate, to 0.1% from the current 0.25%, along with the chance of a 15bp cut to the 3-year yield target and term lending facility (taking these also to 0.1%). A QE programme for the longer bonds could also well be on the agenda. We shall have to wait and see but expectations are for somewhere in the region of Aud$150bio to $200bio. There is nothing to come from Europe although the Brexit talks will continue, and the main event of the day will be the US election. No idea of any result will be expected until the Asian session on Wednesday – if then – and a tight result may take weeks to decipher.  We shall have to wait and see. Until then, have a good day.

Economic data highlights will include:

Tue: Australian RBA Interest Rate Decision/Statement, US Presidential Election, US Factory Orders, Total Vehicle Sales, ISM NY Business Conditions, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory

Market moves, in brief:

FX: DXY 94.12 (+0.26%)

Bonds: US10Y; 0.847% (-3.27%), German 10Y; -0.636% (-1.63%), UK 10Y; 0.219% (-16.45%), Australian 10Y; 0.835% (-0.77%), NZ 10Y; 0.567% (+3.98 %), China 10Y; 3.213% (+0.93%)

Stock Indices: DJI; +1.60%, S+P; +1.05%, NASDAQ; -0.05%, EUStoxx50; +2.07%, FTSE100; +1.39%, Shanghai Composite; +0.02%, ASX200SPI: +0.20%

Metals: Gold $1895 oz (+0.84%), Silver $24.08 oz (+1.83%), Copper $3.0860 lb (+1.26%), Iron Ore $117.50 per tonne (NYMEX) (-0.24%),

Oil: WTI $36.95 pb (+3.44%)

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Trend Table: November 2, 2020                                                    

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In the trend table below, when looking at the charts for a particular FX pair, index or commodity, we are we searching for 2 or 3 consecutive boxes of the same colour which might indicate a trend – and a possible trading opportunity. Consecutive (1 & 4 hour, 4 hour/daily, daily/weekly) green boxes indicate a possible uptrend; red, a possible downtrend, while blue signifies a neutral bias (range trade possibility).  The boxes on the trend table merely replicate the look of the charts for the specific time-frame in MT4/5.

For instance, if we see consecutive green boxes in the  1 hour and 4 hour time-frames for the FX pair “EURUSD”, that would signify the chance of a move higher in that pair over the next 24 hours. If the dailies were also green that would add to the bullish conviction from a slightly longer term perspective, and if the weeklies are also green then it would give added credence to the longer term bullish view, albeit that it might take longer for the trend to play out, so patience will almost certainly be required.   The opposite would be true of red boxes, which could signify downward momentum. The strength of any possible trend depends on the time-frame, with the longer term (daily, weekly charts) obviously having a greater overall weighting than the short-term charts.

In the near term though, the 1 and 4 hour charts are what are likely to combine to indicate the possibility of a trading idea for the next few, possibly up to 24, hours.

Note that a longer term bullish view (green daily/weekly boxes) does not discount the possibility of near term dips (i.e. Red 1 & 4 hour boxes), which may indicate near term weakness and suggesting that we should be looking to buy dips for a longer term rally – and vice versa if the near term boxes are green and the longer term; red.

EURUSDUSDJPYGBPUSDUSDCHFAUDUSDNZDUSD
1 HourNeutral – Turning Lower?Turning Higher?Neutral – Turning Lower?Bearish DivergenceNeutral – Turning Higher?Neutral
4 HourPossible Basing FormationNeutral – Turning Higher?Turning NeutralTurning HigherNeutral – Turning Higher?Turning Neutral
1 DayNeutral – Turning Lower?Turning NeutralTurning NeutralNeutral – Turning Higher?Turning NeutralNeutral
1 WeekTurning Lower?Turning NeutralTurning NeutralPossible Basing FormationTurning LowerPossible Topping Formation
DXYS+PASX200GOLDSILVEROIL_WTI
1 HourTurning NeutralTurning LowerTurning LowerPossible Topping FormationTurning NeutralUp
4 HourNeutral – Turning Higher?Turning HigherTurning HigherTurning Higher?Neutral – Turning Higher?Turning Higher
1 DayNeutral – Turning Higher?Neutral – Turning Lower?Neutral – Turning Lower?Turning NeutralTurning NeutralNeutral – Turning Lower?
1 WeekPossible Basing FormationTurning LowerTurning NeutralDownDownNeutral
EURJPYEURGBPGBPAUDAUDJPYEURAUDAUDNZD
1 HourTurning NeutralNeutralTurning LowerTurning HigherTurning LowerTurning Higher
4 HourTurning HigherTurning NeutralTurning NeutralTurning Higher?Neutral – Turning Lower?Turning Higher?
1 DayTurning LowerNeutralTurning NeutralNeutral – Turning Lower?Turning NeutralPossible Basing Formation
1 WeekTurning LowerTurning NeutralNeutral – Turning Higher?Turning LowerTurning NeutralTurning Lower

 

There are no recommendations today ahead of the election.

The US$ does retain a bid tone although the stockmarkets look mixed. I think being square until we see some clarity might be the best plan.

For those wishing to have a position through the RBA Meeting, AudNzd does look bid and may be worth a punt.

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