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Intermarket:
- SP Futures 3273 (+0.26%)
- EUSTXX 2963 (+0.13%)
- Crude Oil 34.35 (-4.22%)
- US 10YR 0.86
- EurUsd 1.1637 (-0.07%)
- UsdJpy 104.72 (+0.07%)
- DAX 11596 (+0.28%)
Markets are off to a slow start, ahead of the biggest risk event of the year: the US elections. Polls continue to favour Biden, but if we have learned anything from the 2016 election, it’s that polls can be misleading. Apart from a potentially protracted and contested election outcome, another potentially disappointing scenario to contemplate would be where Biden becomes president, but the Democrats fail to take the Senate and policy gridlock results. Markets may remain largely rangebound ahead of the vote.
Meanwhile, the rising Covid infections in both the US and also Europe is worrying, with the UK being the latest to announce a nationwide lockdown from Thursday for a month, joining the club of France, Spain, Italy, Portugal and Germany who had earlier implemented partial lockdowns. Austria, Greece and Belgium are also reintroducing restrictions. All this should weigh on the Euro, and the Pound.
Elsewhere, Crude Oil fell further as Libya ramped up production towards 1Bln bpd. One newswire also pointed to tough coronavirus restrictions across Europe weighing on sentiment.
Looking Ahead: we have the final EU PMIs (which shouldn’t be market moving) and the US ISM Manufacturing (which may be less influential coming ahead of the elections). With a strong Philly Fed and a weak Empire State, we have no strong view on the ISM print this time.
Matters that Matter:
• New Zealand PM Ardern: Names Grant Robertson as Deputy PM and will continue as Fin Minister
• RBA: To explore potential use and implications of a wholesale form of central bank digital currency (CBDC); partnering with CBA, NAB, Perpetual and Consensys Software; project to explore funding, settlement and payment of a tokenised syndicated load on an Ethereum-based DLT platform
• UK PM Johnson will on Monday say there is no alternative but to lock down England; seeks to ease restrictions after Dec 2
• Australia Oct AiG Perf of Manufacturing Index 56.3 from 46.7
• China Oct Caixin Manufacturing PMI 53.6 from 53.0
• With two days to go, Trump casts doubt on integrity of prolonged vote count
• U.S. coronavirus cases keep rising in grim march to Election Day
• Brexit talks go into another week as EU, UK push to salvage trade deal
• Lockdown in England could be extended, UK minister warns
Majors Weekly View:
USDJPY
- Despite posting the 3rd lower weekly high & low in row, prices rejected 104.00 last week and closed little changed, with a Daily positive divergence in momentum appearing. While this is positive, caution is advised and buying dips towards 104.00 is the keener play.
- Bids reported around 104.00, offers around 105.00.
EURUSD
• Prices posted a bearish engulfing last week, with a 4 Big Fig decline. While this is bearish, caution is advised as signals have been switching direction in each of the past 4 weeks.
• Bias still down on ECB easing bias, Covid-19 lockdowns.
AUDUSD
• Prices posted the 3rd lower weekly high & low in a sequence last week, which keeps signals bearish into this week.
• Risk off mood remains, but US election is the main focus.
• Break of .7000 key for near-term momentum.
GBPUSD
• Signals have been switching direction in each of the past 4 weeks, suggesting indecision. As such, confidence is low, but a slight downwards bias remains for this week.
• Brexit still the main issue for the Pound.
• Sudden lockdown less influential than expected in slow markets ahead of US elections.
FX Relative ATR Grid
Comment: Ranges contracted slightly last week with the exception of JPY and USD pairs, where we can expect continuation this week. Instead, NZD is due for a range expansion after showing decisive contraction last week.