BFJ Research

Part 1. Market Overview

The market had a rollercoaster ride yesterday, with USD ended up rising and the Pound falling. The global market focus still remained on the upcoming US presidential election, US stimulus plan, and Brexit. With an hour remaining to the final US presidential debate, the USD picked up some momentum, possibly not because of the pre-election stimulus deal, as Pelosi’s comment of ‘coming soon’ seems very reminiscent, that it will not come anytime soon, therefore the market sentiment is reflecting on how much greater of the stimulus Biden could bring to the US economy if he wins the election. Bear in mind that the current negotiation is only between the house representative and the white house, the resistance from the senate Republicans still persist, as the current election is very much Biden favored, they may show more resilience in agreeing the stimulus package. Speaking of the election, unless Trump pulls out something unexpected before the election, the main focus now should be the tug of war within the senates, and it will have an impact in whether Biden’s election promises could be realized.

The UK has added more support payments for workers as COVID cases continue to rise, there and across Europe, this is expected to bring a certain degree of relief to the market pressure, given everything has slowed due to tighter restriction. Newspaper Daily Express report claims Michel Barnier sees fish as the only sticking point for Brexit, given Michel has already arrived the UK, if the news is true, it suggests a deal is closer than ever. Aside all the positive news, drop in UK consumer confidence fuels double-dip recession fears, which ultimately contributed to the fall in sterling.

Part 2. Previous Economic Data Highlight

Bailey did not provide any significant comment or guidance that moved the market yesterday, he did however mention businesses will need equity investment on a scale not seen in normal times, suggesting domestic businesses are suffering.

The US jobless claims data came in a surprising fashion, which is much lower than expected. This on the surface is a good news and it contributed to the rise of USD, nonetheless, under the iceberg is suggest the data for next round may not be as good – most of the current drop can be attributed to California associated to elimination of backlog and improved fraud prevention, all of which are a one step improvement and won’t be seen next week. Moreover, many have seen exhausting benefit of the jobless claims and have moved to other benefit schemes such as the Pandemic Unemployment Assistance scheme, meaning the initial jobless claims may not be a true reflection.

The over all PMI data was better than forecast, with new orders expanded, but employment contracted amid surplus in operating activity. This reflects a rising demand but potential decrease in supply, which also explains previous positive data regarding confidence.

Part 3. Upcoming Economic Data

The September UK retail sales data will not be a reflection of the impact of recent restrictions imposed in the UK, whilst we expect the market has already digested the impact of restriction given the market has reacted to the restrictions when announced, this should have minimal impact.

The UK PMI will be released later tonight, which should reflect the impact of restrictions.

Part 4. Technical Analysis


Nothing major happening on the fundamental aspect, the presidential debate did not touch on major policies and hence gave little guidance to the market. The rise of USD seemed to cease in the morning, but the 24hr MA crossing 72,120,240 hr MA suggests there is space for continuation of downward trend in gold. In terms of intraday, there is a narrow consolidation between 1907.5-1901.2. if the candlesticks end beneath 1901 in the next few hours, we expect more space for downward movement.