BFJ Research

Part 1. Market Overview

The market has been lifted higher on further vaccine news, with Moderna saying their trials have shown 94.5% effectiveness. Compared to Pfizer and BioNTech, Moderna’s vaccine could be stored in conventional fridge cooling temperature, meaning distribution would be much easier, therefore countries with more sophisticated logistics could perhaps preferentially choose Pfizer, and vice versa. As vaccine won’t help the pandemic, but rather vaccination does, distribution should be the current focus now, moreover, immunity does not equal to controlled transmission, and asymptomatic transmission would be another challenge to tackle.

The markets are pricing in the positive news that we could have vaccines distributed early next year as described by numerous experts, whilst ignoring the bad news of rising infection rates, particularly in the US where it adds more than 1 million case in a single week. Philip Lowe from the RBA said yesterday that it will closely monitor and follow other major central banks, with the aim to contain strength of the AUD, and a focus on the labour market. Besides, the Europe’s recovery plans has once again face obstacles from Poland and Hungary.

Part 2. Previous Economic Data Highlight

China released a series of data yesterday which all were quite positive, with a highlight on the retail sales, which is one of the important numbers that reflect consumer confidence and willingness of spending, and October was China’s eighth consecutive month of increasing growth.

Last night Philip Lowe spoke for the RBA, that the RBA will closely monitor other major central banks and likely to follow as well. The main goals were to improve employment rate, as well as contain the strength of AUD, and the fear was AUD goes up in value whilst USD drops in value, which is not good for economic recovery.

Part 3. Upcoming Economic Data

The US shall release a series of economic data tomorrow, looking back, US retail sales experienced a rise in September in every aspect, such as food and services, nonetheless, as Covid surged again, the data is expect to worsen, and the same goes to other data as well.

The BoE will speak on Wednesday Australian time, whilst Brexit talk has been stalled for more than a week, with the resignation of Dominic Cummings, it would be interesting to see if the BoE will provide any remark regarding Brexit.

Part 4. Technical Analysis


The gold market was impacted by the positive vaccine news yesterday, nonetheless, the extent of the impact was not as severe as the Pfizer vaccine, the reason is twofold. Firstly, the 90% effectiveness of the Pfizer vaccine hit the market unexpectedly, the overwhelming positive news significantly alter the market expectation, whilst most experts only expected 60% at most. Since Moderna uses very similar technology in its vaccine development, the market had similar expectation towards its success. Secondly, there are still major hurdles that must be addressed, distribution and logistics being the most important ones, as only vaccination will lead to recovery of the global market, moreover the disease transmission issue is not resolved via vaccine.

While the global market recovery is heading the right direction, the USD will be most likely to continue falling, and there will be room for increase in gold price. From the technical perspective, the shortfall of XAU experienced a quick rebound, and currently consolidation between 1884.5-1899. If XAU continues to rise, the next resistance to be monitor will be at 1912; if XAU falls, the effectiveness of the support area at 1850 will be tested again.