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Intermarket:
- SP Futures 3401 (+0.24%)
- EUSTXX 3100 (+0.10%)
- Crude Oil 38.85 (-0.77%)
- US 10YR 0.80
- EurUsd 1.1835 (+0.22%)
- UsdJpy 104.73 (-0.10%)
- DAX 12196 (+0.21%)
Risk sentiment remains soft going into Tuesday despite bouncing from Monday’s lows on profit taking. A combination of moderate China retaliatory measures on US media firms alongside fleeting hopes of a US stimulus package sent equities lower. It now seems definite that there will be no stimulus package until after the elections as Senate leader McConnell adjourning the upper house until November 9.
However, markets mostly remain headline-driven and rangebound as market participants are holding very low risk and positions have been greatly reduced over the week, ahead of US elections. This means that short-term strategies should outperform as followthrough is rare.
There was some focus on the Ant Group IPO book in Hong Kong will close early tomorrow at 9.40 am Hong Kong, instead of Friday. This left the market guessing the size of oversubscription.
In FX, AUD remains rather resilient. There may be a couple of reasons: US equity futures turned positive from earlier losses, USDCNH slipped below 6.70-handle and the recently announced M&A deals like Coca Cola and Boral.
Looking Ahead: the key focus is on the rise of Covid-19 cases both in Europe and the US, with the latter now seeing a third wave and new lockdowns from the authorities.
Matters that Matter:
• Pelosi optimistic of relief bill before elections
• Wave of new COVID-19 cases crashes across U.S. and Europe as winter looms
• Brexit: UK PM Johnson’s spokesman says there is much work to be done to bridge significant gaps remaining with EU in most difficult areas
• U.S. State Department approves $2.4 bln more in potential arms sales to Taiwan -Pentagon
• Australia GDP growth likely turned positive in Q3, cannot comment on chance of QE at Nov meeting - RBA’s Debelle
• “Time is very short” Britain says as EU’s Barnier heads to London
• Investors line up for Ant Group’s record $34.4 bln IPO
• NZ Sep Trade Balnce, -1,017 mln, -353 mln prev, -282 mln rvsd
• Eli Lilly: No more Covid-19 patients in setting to get Bamlanivimab; treatment unlikely to help hospitalised patients recover; all other Balanivimab studies remain ongoing; trial of Covid treatment in hospital setting to end; antibody LY-COV555 trial won’t enrol more participants
Majors 1-Day View:
USDJPY
- Prices posted the 2nd higher daily high & low in a row on Monday, but closed little changed showing topside rejection. Selling in Asia today is weakening signals and the call is to sell on a rally to 105.00 or sell down through 104.55.
- Trading to the downside in Asia despite the recovery in risk.
- Support at 104.55, then 104.34.
EURUSD
• Prices have switched direction in each of the past 4 days, showing indecision and a rangebound market. With buyers returning near 1.1800/50DMA during Asia trade, the outlook is to sell around 1.1850/60.
• USD giving back some of yesterday’s gains in choppy trade.
• Eur negatives remain: dovish ECB, Covid-19 cases, lockdowns.
AUDUSD
• Prices posted an inside day on Monday, with trading contained within Friday’s .7100/.7160 range. As such, the call is to remain neutral within this range and trade the breaks.
• AUD resilient despite RBA easing bias, perhaps due to M&A flows and easing restrictions?
• Bids reported at .7100.
GBPUSD
• Prices posted the 2nd lower daily high & low in a row on Monday, but buyers have retuned at the 1.3000 round number. As such, the outlook for Tuesday is to sell on a rally to 1.3050s.
• Brexit negotiations continue, headlines to impact the Pound.
• Lockdowns becoming more widespread.
FX Relative ATR Grid
Comment: Ranges contracted further on Monday, showing indecisive markets and a rangebound environment. As such, being more selective is required.
FX Relative Strength Grid
Comment: the main signals going into Tuesday are GBP, Cad, Eur weakness vs. NZD and USD strength.