BFJ Research
09.11.2020

Part 1. Market Overview

The 2020 US presidential election has finally come to an end, with Joe Biden slightly ahead of Donald Trump in the electoral votes, despite Trump is currently in denial of his loss and threatening to take it to the High Court, Biden will remain as the election victor until then. In terms of the House and the Senates, there is still a chance that in January the Democrats will take control, as major betting sites are showing roughly 30% lean in favour of Democrats. Biden’s first challenge in his presidency is perhaps the rising Covid cases without a firm fiscal stimulus now, although last Friday’s non-farm payroll suggested a strong number, and the need for support is less apparent than before.

This week is a relatively quiet week without many actions and events, except for Trump’s legal challenges on the election results, but the market is not likely to respond to the sideshow. There is also no progress to the Brexit talks, even though the clock is ticking louder now.

Part 2. Previous Economic Data Highlight

The US economy added 638k jobs in October, still, it is the smallest employment gain since the market started to recover in May. The biggest job gains occurred in leisure and hospitality, indicating ‘post-pandemic’ mentality is slowly creeping into people’s mind, despite the US is reporting nearly 100,000 new cases every day. Looking ahead, the recovery of the labor market remains challenging as only 12 million jobs were recovered out of the 22 million jobs lost in March and April.

China reported strong October trade numbers on Saturday, as trade surplus was 38% stronger YoY, with exports jumped by 11.4% MoM. Nonetheless, with Covid cases rising again in the rest of the world, China’s trade numbers are expected to face some pressure.

Part 3. Upcoming Economic Data

A fairly quiet week ahead, with the 2020 US election taking a curtain, the major banks are due to speak this week, but guidance may be limited, nonetheless they may react to Biden’s victory as the markets may also start to react. While the US election is out of the market’s focus, Brexit is back on everyone’s sight, investors should closely monitor any progress with the Brexit talks.

Part 4. Technical Analysis

 XAUUSD

On the daily chart, the US election has pushed the gold price out of the week-long wide range consolidation between 1847-1932. The Biden victory announcement over the weekend has caused little movement in the market today, as Biden’s lead in Michigan and Wisconsin had been factored in the market with the expectation towards his election victory. A Biden victory will lead to a fall in USD, and consequently push the gold price in the near term. In terms of intraday, an upward trend has been initiated on the hourly chart, if the upward movement continues, there is room to reach the 1973 level.

GBPUSD

On the daily chart, the US election had minimal effect in moving the GBP market, overall, it still remains in a triangular consolidation. In terms of intraday, the shortfall in USD due to Biden’s victory has caused upward movement in GBP on the hourly chart, with strong bullish candlesticks today. While the 5MA system indicate a bullish pattern, the upward movement is strong, whilst ATR shows volatility is relatively low. Investor should closely follow any updates regarding Brexit talks, as a successful Brexit deal will likely to further boost GBP, with potential to reach 1.35 level.