BFJ Research

Part 1. Market Overview

Last month, the US equities tumbled, with USD down, and S&P had its worst month since March, along with Nasdaq down 2.5% and Dow down 7.5% over the month. The major movements  last month were led by tech companies, despite strong performance in the third quarter, their future guidance was downplaying the market, as the previous strong performance were ‘low hanging fruits’ due to Covid, and may not be repeated in next 6-12 months. Ahead of a busy week, we have not only the US election coming up on the 3rd of Nov, but also with the RBA, the Fed and the BoE all meeting, with the difficulty of determining how to see the economy through rising Covid infection numbers. The non-trivial matter of US election continues to be the focal point, with Biden continues to lead the polls by 8.7%, however there are still uncertainties in the election as the current polling includes early mailed voting which is heavily Democrats favored, and we can expect an increase in Republican in-person voting on election day; beside, the major swing states including Pennsylvania and Florida are still uncertain. If Biden does win the election, we can expect a larger stimulus package, in which the US will need more money to fund it, and one way to funding is via release of more treasury bond.

Part 2. Previous Economic Data Highlight

GDP QoQ Growth in both Germany and EU both spiked in the third quarter, the expansion was supported by a rebound in household consumption, strong fixed investment in machinery and equipment and a sharp increase in export. Nonetheless, with the second wave of Covid currently striking in Europe, the Q4 figures may be gloomy.

The US personal income gain was boosted by proprietors’ income, compensation of employees and rental income of persons, which were partly offset by a decrease in government social benefits according to the US Bureau of Economic. Spending on the other hand also experienced an increase, with clothing and footwear as well as new motor vehicles being the leading contributors to the gain. Such increase suggests the Americans are adapting to the Covid lift and gradually returning to normal spending pattern.

The US PCE is one of the important indicators that reflect inflation, and it has been increasing positively since April 2020.


Part 3. Upcoming Economic Data

Aside the US election, the focal points are on RBA, BoE, and Fed. To echo last week’s message, the question for the RBA tomorrow will be whether they will announce an increase to QE or provide guidance to the interest rates. The BoE could potentially comment on implications that Brexit will have on the UK economy, where the Fed may not be able to provide too much guidance as there are many uncertainties to the US election, whilst. vote counting may take longer than expected.

Part 4. Technical Analysis


With US election continues to be the theme of the current market, there are many uncertainties in the market. Within the wide range consolidation between 1889-1859, there is a short-term rising trend since last Thursday, with higher highs and higher lows, and the trendline drawn has been effective so far. In terms of intraday, our 5MA system are still showing bearish pattern on the hourly chart, the current rebound on the trendline may be resisted by the resistance line at 1889. We need to pay close attention to the resistance line at 1889 and examine its effectiveness, if there is a breakout, there may be room for further upward movement.



JPY continues its wide range consolidation, while our 5MA system on the hourly chart is merging together. In terms of intraday, the 240hr MA has been an effective resistance, currently sitting at 104.7. If the pattern for the past two trading days is retraceable, there will be a pullback today.