BFJ Research
05.11.2020

Part 1. Market Overview

With all eyes on the 2020 US election yesterday, the only certainty is uncertainty, the FX market surprisingly did not have substantial moves, despite some fluctuations in between openings and closings, the market eventually corrected itself, ended with USD slightly up and GBP down. The US election latest result shows 264 Biden vs 214 Trump, as Biden just won Michigan earlier this morning; despite the lead, a clear winner of the election is yet to be known. Throughout the election, the Senate looks less clear with its potential victor, whilst there is potential for divided US political agendas, with White House and Senates led by different parties, the dysfunctional US politics could lead to current pressure put on tech companies being eased, which partially explains the climb of Nasdaq. On the other hand, the Brexit talk has stalled again as Michel Barnier said the negotiation had little progress after 6 straight days of negotiation, which partially explains the drop of GBP. All aside, the main focus today remains on the US election and the vote counts, and whether Trump will challenge the result if he loses.

Part 2. Previous Economic Data Highlight

The October Caixin China PMI was higher than previous month and forecast, the numbers are supported by stronger increase in both manufacturing production and services activity, signalling an accelerated rise in overall business activity across the country’s private sector.

The Markit PMI numbers for the major nations in the European continent have stayed relatively flat, despite growth was still witnessed in private sector activities, there is a notable decrease in manufacturing activity in Germany and services in the UK, both of which are expected under the current surge of Covid in Europe. Looking ahead, Covid is yet to be controlled and lock down procedures have already been imposed; thus, the numbers may be weaker in the up coming monthly release.

known for its reliance on its partnership with China, with the increasing tension between China and Australia, China has imposed a series of ‘sanctions’ against Australia in the form of halting imported goods from Australia, and the latest goods being halted include copper and wine, both of which are Australia’s biggest export products.

Part 3. Upcoming Economic Data

Whilst BoE previously hinted the chance of going into negative rate territory is minimal, there is little room for BoE to manoeuvre with interest rates. Investors should focus on whether there will be hints regarding Brexit and its progress.

US jobless claims will be released tomorrow 12:00AM (AEST).

The delayed election vote counts could affect the Fed’s decision, as they are unsure who will win the presidency, hence unable to make forecasts accordingly.

Part 4. Technical Analysis

 XAUUSD

The only certainty regarding the US election is uncertainty, and it was reflected in yesterday’s gold market, with heavy daily fluctuation. Yet, it had little impact on the daily chart, as the triangular consolidation pattern was still in form. In terms of intraday, the market has quieted down as Biden secures a lead over Trump, and there is little movement on the hourly chart, with long shadow-lines and short bodies for the past few hours, further showcasing the market uncertainty. If Biden does win the election, a larger stimulus package will likely to be adopted, and the USD will be falling accordingly, resulting in a rise of XAU. If there are more positive news for Biden later today, XAU may pick up more upward momentum to the 1920 area.